What payroll deductions are employers required to withhold?

Payroll Tax Deductions Employers Must Withhold in New Jersey

Employers operating in New Jersey are responsible for withholding specific payroll taxes from employee wages. Proper withholding ensures compliance with state and federal requirements and supports accurate payroll processing and reporting.

Mandatory Payroll Deductions

• Federal Income Tax: Employers must withhold federal income tax based on employee W-4 forms and IRS tax tables.
• Social Security Tax: Withhold 6.2% of wages up to the annual wage base limit as of 2026.
• Medicare Tax: Withhold 1.45% of all wages, with an additional 0.9% on wages above the applicable threshold.
• New Jersey State Income Tax: Employers must withhold state income tax according to employee NJ-W4 forms and the New Jersey withholding tables.
• New Jersey Unemployment Insurance (UI): While employers pay this tax, it is not withheld from employee wages.
• New Jersey Temporary Disability Insurance (TDI): Employers are required to withhold TDI contributions from employee wages as specified by state rates.
• New Jersey Family Leave Insurance (FLI): Employers must withhold FLI contributions from wages according to current state rates.

Additional Operational Considerations

• Employee Classification: Proper classification of employees versus contractors affects withholding obligations.
• Recordkeeping: Maintain detailed payroll records to support withholding amounts and reporting compliance.
• Reporting Requirements: Submit withheld payroll taxes to the appropriate federal and state agencies on time to avoid penalties.
• Automation: Use payroll software that integrates New Jersey-specific withholding rates and updates automatically to reduce errors.

As of 2026, staying current with New Jersey tax rate changes and withholding guidelines is essential for smooth payroll operations and compliance.