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I work for a company based in NY, who pay my salary into a US bank account.

I live in Japan, and all my work is done remotely from Japan.

The address in my company HR records is a PO Box in New Jersey. However, I have never been to NJ, and certainly none of my work is performed there. The company knows all this.

On the W2 form for 2020, my employer put NJ in box 15, and and my total salary amount in box 16. I’m trying to persuade them not to do this on my 2021 W2, because it makes my tax accountant (and me) nervous.

So, I have two questions:

  1. What is the formal legal definition of box 16? I have seen various fuzzy ones, and I’m looking for something authoritative.
  2. Should I just ignore this? I’m not subject to NJ taxes, AFAIK, no NJ taxes are withheld from my salary, and I don’t file NJ tax returns.

There are other questions about non-resident tax liability. My question is different, I think. I’m pretty sure my salary is not subject to NJ taxes, but I’m worried that box 16 on my W2 seems to suggest otherwise. The question is more about the meaning of boxes on the W2, rather than tax liability.

More info:
When I started working for the company a few years ago, I read the NJ tax rules, concluded that I am not subject to NJ income tax, and I said so on some form I filled out. As a result of this, I was able to convince my company not to withhold NJ taxes. I’m a US citizen, and so (of course) I pay US federal taxes.

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  • Thanks, but that doesn’t answer my question. As I said, I’m pretty sure my salary is not subject to NJ taxes, but I’m worried that box 16 on my W2 seems to suggest otherwise. The question is more about the meaning of boxes on the W2, rather than tax liability. Dec 28 '21 at 2:29
  • And I’d like to have an authoritative definition of box 16 that I can use to bludgeon my HR folks into submission. Dec 28 '21 at 2:31
  • @BubbaKittee Box 16 is earnings attributed to the state. They filled it correctly, based on the facts you've presented.
    – littleadv
    Dec 28 '21 at 2:32
  • What does “attributed to the state” mean? From what you say, it’s apparently not money earned from work performed in the state. And it’s not earnings from work performed while a resident of the state. Still puzzled. Dec 28 '21 at 2:37
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You have a complicated situation. Lets ignore the Japan situation for a second.

I work for a company based in NY, who pay my salary into a US bank account.

...all my work is done remotely ...

The address in my company HR records is a PO Box in New Jersey. However, I have never been to NJ, and certainly none of my work is performed there. The company knows all this.

It doesn't matter what the company knows it is what the payroll processing system was told.

In some situations where you live in one state and work in another, it depends on where you live (for example DC, MD and VA). In other cases both states will want to make a claim on your state income taxes.

If the payroll system thinks you live in NJ they will assign all your income during that period of time to NJ. Most of the time this is done via the state version of the W=4. I know there is a default federal W-4, but I am not sure if there is a default New Jersey W-4.

According to the IRS for Form w-2 this is what box 16 represents:

Boxes 15 through 20—State and local income tax information (not applicable to Forms W-2AS, W-2CM, W-2GU, or W-2VI).

Use these boxes to report state and local income tax information. Enter the two-letter abbreviation for the name of the state. The employer's state ID numbers are assigned by the individual states. The state and local information boxes can be used to report wages and taxes for two states and two localities. Keep each state's and locality's information separated by the broken line. If you need to report information for more than two states or localities, prepare a second Form W-2. See Multiple forms. Contact your state or locality for specific reporting information.

Because a copy of the W-2 will be sent to the appropriate states tax authority, that state will be expecting you to fill out some tax form. If you don't send in a form, expect a letter in a future year when they come looking for their money. If there are numbers in Box 17 (State income tax) that means money was sent to the state of New Jersey, and you will have to file a tax form to get it refunded, if your tax situation warrants it.

The situation now becomes more complex when you throw in the fact that you actually live in Japan. The question is which state, if any, can claim you. If you are registered to vote in a state, or have a drivers license for that state they will be looking for your income. If you are using that state as your official address for tax forms, and other things, then they will be expecting you to file a tax return.

So when you file your tax forms with New Jersey, you will have to convince New Jersey that you are domiciled someplace else, and your place of abode is someplace else.

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  • Yes, what you say about payroll systems makes sense. Our payroll processing is outsourced to a company called Justworks, and they’re the ones who issue the W-2 forms. I left this out because I didn’t think it was relevant. Dec 28 '21 at 14:02
  • If NJ comes looking for tax payments, I think I’m safe. I don’t have a NJ driver’s license, don’t own any property there, am not registered to vote, and have never spent any time there. Dec 28 '21 at 14:05
  • No NJ income tax is withheld from my salary, so I don’t need to file a return to get money back. They say possession is nine points of the law. Let’s hope so. Dec 28 '21 at 14:07
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Box 16 is earnings attributed to the state. They filled it correctly, based on the facts you've presented. You told your employer you live in NJ, and they filled the W2 based on that information.

The reason those boxes exist is because states may define "wages" differently and what's excluded from them differently. For example, NJ doesn't allow excluding 401k contributions from wages, while the Federal law does, so box 1 and box 16 for NJ would differ because of that. It doesn't mean that you're liable for taxes, but if you are - you should be using the values from box 16. The employer doesn't know and doesn't care about your tax liability. They know you live in NJ (officially, that's the address you gave them), so they calculated your NJ wages.

You'll have to sort this out with the NJ government yourself, your employer did everything right. Whether or not you're liable for taxes in NY or NJ is up to these States and may not actually be directly dependent on where you physically live. In fact, I'm surprised they didn't withheld any taxes for NYS/NYC.

If according to NJ law you're not liable for taxes, you should receive a refund for the State taxes withheld, but I'm pretty sure NJ would expect a tax return from you now, given that you have NJ income reported.

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  • Sorry. Wrote comments on the question before I saw your answer. Please see above. Dec 28 '21 at 2:38
  • I’d still like to get a clear definition of terms like “earnings attributed to the state” and “NJ income”, please. Dec 28 '21 at 2:53
  • @BubbaKittee I'm sorry, you'll probably be better off hiring a NJ-licensed CPA for this. The definition of what should be in box 16 for NJ is in NJ rules and regulations, and I'm not very familiar with those. The IRS leaves it to the states what they want to see in that box.
    – littleadv
    Dec 28 '21 at 3:13
  • Ok. Thanks for your help. I’d upvote your answer if I had enough rep. I don’t want to accept it for a few days in case someone offers a better one. Dec 28 '21 at 7:48
  • "You told your employer you live in NJ" It seems that the OP's employer is aware that the OP lives in Japan. Is it possible for the OP to give the NJ address as a mailing address, and give a physical address in Japan?
    – user102008
    Dec 28 '21 at 15:46

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