Tax forms
Form NJ-165: stopping New Jersey withholding for Pennsylvania residents
If you live in Pennsylvania and work in New Jersey, your wages aren't subject to New Jersey income tax. Form NJ-165 is how you tell your employer to stop withholding it.
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What Form NJ-165 does
New Jersey and Pennsylvania have a reciprocal agreement: wages a Pennsylvania resident earns in New Jersey aren't subject to New Jersey income tax, and wages a New Jersey resident earns in Pennsylvania aren't subject to Pennsylvania income tax. Form NJ-165, the Employee's Certificate of Nonresidence in New Jersey, is the employee's statement that they live in Pennsylvania, so the employer withholds Pennsylvania tax instead of New Jersey tax.
Who files it and where it goes
- Who: a Pennsylvania resident who works for an employer in New Jersey.
- Where: to the employer, not to the State. The employer keeps it with its payroll records.
- When: when you start the job, and again if your address changes. If you move to New Jersey, the exemption ends; tell your employer.
What it doesn't cover
The agreement covers wages only. Self-employment income and other income both states can tax, such as a gain on selling New Jersey property, still goes on a New Jersey nonresident return.
Already had New Jersey tax withheld?
File a New Jersey nonresident return to get it back, with a signed statement that you're a resident of Pennsylvania. Then give your employer Form NJ-165 so it stops.
The reverse: New Jersey residents working in Pennsylvania
Give your Pennsylvania employer Form REV-419EX, the Employee's Nonwithholding Application Certificate, so it stops withholding Pennsylvania income tax. If Pennsylvania tax was already withheld, a Pennsylvania return gets it back. Local taxes, such as Philadelphia's wage tax, aren't covered by the state agreement.
For employers
Keep each NJ-165 on file, set the employee up for Pennsylvania withholding instead of New Jersey, and update it when an employee moves. Our bookkeeping and payroll support checks this when we onboard your payroll.
Sources: NJ Division of Taxation, income tax reciprocity; Form NJ-165 (PDF). General information, not tax advice.
Related: New Jersey reciprocity and multistate workers · New Jersey residents working in New York · Tax preparation
Questions
Do I send Form NJ-165 to the State of New Jersey?
No. You give it to your employer, who keeps it on file and stops withholding New Jersey income tax.
Does Form NJ-165 exempt all my income from New Jersey tax?
No. The reciprocal agreement covers wages only. Self-employment income and other income both states can tax still go on a New Jersey nonresident return.
What if New Jersey tax was already taken out?
File a New Jersey nonresident return with a signed statement that you're a Pennsylvania resident to get it refunded, and give your employer Form NJ-165 so it stops.
Does this work for New York?
No. New Jersey's reciprocal agreement is with Pennsylvania only. New Jersey residents who work in New York file a New York nonresident return and claim a credit on their New Jersey return.
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