Orlando Harmon
In New Jersey, unemployment insurance benefits are not taxed at the state level, but they are subject to federal income taxes. While the state does not require employers to collect taxes on Paid Sick Leave (PSL), employers are required to pay unemployment insurance taxes and provide employee information to the Division of Unemployment Insurance. Eligible workers who are unemployed through no fault of their own may receive unemployment benefits, which are subject to a base SUI rate of 2.9825% and a Workforce Development Partnership Fund rate of 0.1175%.
| Characteristics | Values |
|---|---|
| Base SUI rate | 2.9825% |
| Workforce Development Partnership Fund rate for employers | 0.1175% |
| Maximum Unemployment Insurance weekly benefits rate in 2022 | $804 |
| Maximum Unemployment Insurance weekly benefits rate in 2023 | $830 |
| Maximum Unemployment Insurance weekly benefits rate in 2024 | $854 |
| Minimum base week amount to qualify for Unemployment Insurance benefits in 2024 | $283 per week |
| Minimum total covered employment amount to qualify for Unemployment Insurance benefits in 2024 | $14,200 |
| Minimum base week amount to qualify for Unemployment Insurance benefits in 2025 | $303 per week |
| Minimum total covered employment amount to qualify for Unemployment Insurance benefits in 2025 | $15,200 |
| Percentage of weekly benefit withheld and sent to the IRS | 10% |
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What You'll Learn
New Jersey doesn't tax unemployment insurance benefits
The state of New Jersey does not levy taxes on unemployment insurance benefits. However, these benefits are subject to federal income tax, which includes all state and federal pandemic-related unemployment benefits. If you received unemployment benefits in the previous calendar year, you must report them as income on your current federal tax return. To do this, you will need Form 1099-G, which you should receive by January 31st either by mail or to the email address you provided. If you do not have a copy, you can access your 1099-G form online by logging into your account.
When you first apply for unemployment benefits, you can choose to have 10% of your weekly benefit withheld and sent to the Internal Revenue Service (IRS). You can also select or change your withholding status at any time by mailing a "Request for Change in Withholding Status" form to the New Jersey Department of Labor and Workforce Development. If you certify your benefits online, you will receive a confirmation screen that provides the gross and net amounts of your payment, as well as any deductions and the year-to-date tax withheld.
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Unemployment insurance benefits are subject to federal income tax
Although the state of New Jersey does not tax unemployment insurance benefits, they are subject to federal income tax. This includes all state and federal pandemic-related unemployment benefits. If you collected unemployment benefits in the previous calendar year, you must report them as income on your current federal tax return.
To help offset your future tax liability, you may choose to have 10% of your weekly unemployment insurance benefits withheld and sent to the Internal Revenue Service (IRS). You can opt to have federal income tax withheld when you first apply for benefits, and you can change your withholding status at any time by writing to the New Jersey Department of Labor and Workforce Development. If you certify for your benefits online, you will receive a confirmation screen that provides the gross and net amounts of your payment, as well as the amount deducted for any refunds or garnishments, and the tax withheld.
After each calendar year in which you receive unemployment insurance benefits, you will be provided with a 1099-G form. This form will show the amount of benefits you received and taxes withheld, and this information is also sent to the IRS. If you did not receive unemployment insurance compensation payments for the tax year on the notice, you may be the victim of identity theft.
Your 1099-G form will reflect the total amount paid to you during the applicable tax year, regardless of the week that payment was for. So, if you received payments this year for unemployment benefits that were due to you from a previous year, the income from those payments will appear on your 1099-G for this year.
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The base SUI rate is 2.9825%
The base SUI (State Unemployment Insurance) rate in New Jersey is 2.9825%. This rate is applicable to unemployment benefits provided to eligible workers who are unemployed through no fault of their own and meet the state's eligibility requirements. The weekly benefit rate (WBR) for unemployment insurance in New Jersey is calculated based on the individual's earnings during the base year period before applying for benefits. To be eligible for Unemployment Insurance benefits in 2024, for instance, an individual must have earned at least $283 per week during 20 or more weeks in covered employment during the base year.
The state of New Jersey does not levy taxes on unemployment insurance benefits. However, these benefits are subject to federal income taxes. Individuals receiving unemployment benefits have the option to voluntarily withhold a portion of their benefits for federal income tax purposes. They can choose to have 10% of their weekly benefit withheld and sent to the Internal Revenue Service (IRS). This withholding status can be selected or changed at any time by submitting a "Request for Change in Withholding Status" form to the New Jersey Department of Labor and Workforce Development.
It is important to note that the weekly benefit rate for unemployment insurance may be influenced by other factors, such as part-time work or the collection of a pension. Additionally, for workers who do not qualify with a standard base year, alternative methods are available to calculate the base year for determining eligibility and benefit amounts.
The base SUI rate of 2.9825% serves as a foundation for determining the unemployment benefits provided to eligible individuals in New Jersey. This rate is separate from the federal income tax considerations on unemployment benefits, which individuals should be aware of when filing their federal tax returns.
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The Workforce Development Partnership Fund rate for employers is 0.1175%
In New Jersey, the Workforce Development Partnership Fund rate for employers is 0.1175%. This is an additional rate to the base SUI (State Unemployment Insurance) rate of 2.9825%. Together, these rates determine the unemployment insurance tax that employers must pay.
The SUI program provides unemployment benefits to eligible workers who are unemployed through no fault of their own and meet the state's eligibility requirements. The base SUI rate is the same for all employers, while the Workforce Development Partnership Fund rate remains consistent across the state.
The State Unemployment Insurance rate is calculated based on various factors, including the employer's payroll and the amount of taxable wages paid. It is important to note that the SUI rate is subject to change and may vary from year to year. Employers should stay updated with the current rates to ensure compliance with their tax obligations.
The Workforce Development Partnership Fund rate, on the other hand, is a consistent additional rate applied to all employers in New Jersey. This rate contributes specifically to the state's Workforce Development initiatives and programs. It is designed to support the development and enhancement of the state's workforce, ensuring a skilled and competitive labour force.
By understanding and staying compliant with the applicable rates, employers in New Jersey can effectively manage their tax liabilities and contribute to the important state programs that support unemployed individuals and workforce development.
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You can choose to have 10% of your weekly benefit withheld and sent to the IRS
Unemployment insurance benefits in New Jersey are not taxed by the state. However, they are subject to federal income taxes. You can choose to have 10% of your weekly benefit withheld and sent to the IRS to offset your future tax liability. This is a flat rate that applies no matter your income bracket. This option is available to you when you first apply for benefits, and you can select or change your withholding status at any time by writing to the New Jersey Department of Labor and Workforce Development. You can also set this up by filing Form W-4V and sending it to your state's unemployment agency. After each calendar year in which you receive unemployment insurance benefits, you will be provided with a 1099-G form, which will show the amount of benefits you received and taxes withheld. This information is also sent to the IRS.
It is important to note that unemployment benefits are generally subject to federal income taxes, except for certain cases. For example, the American Rescue Plan Act of 2021 changed the tax code so that the first $10,200 of unemployment benefits received in 2020 were free of federal taxes. Therefore, only the amount received over $10,200 counted towards taxable income for that year.
To avoid surprise tax bills, the IRS recommends that you set up withholding when you first apply for unemployment benefits. This way, you can ensure that a portion of your benefits is set aside to cover your tax liability. Additionally, you can choose to pay the IRS directly or withhold taxes from your payment. The available withholding rates are 7%, 10%, 12%, or 22% of your monthly payment.
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Frequently asked questions
While the state of New Jersey does not tax unemployment insurance benefits, they are subject to federal income taxes.
You must report your unemployment insurance benefits as income on your federal tax return. You will need a 1099-G tax form to do this, which you can access online or via mail.
Yes, you can choose to have 10% of your weekly benefit withheld and sent to the IRS. You can select or change your withholding status at any time by mailing a Request for Change in Withholding Status form.
