Hi,

Here's my situation.

Facts:

I am a consultant for company X (W-2 arrangement),which is based in New Jersey, where I was hired for a 6-month contract in New Jersey to perform work for one of their clients--company Z. I am a current resident of Arizona where I have a house and I plan on returning after the contract and getting work back in Arizona as soon as possible.

My work load is demanding enough that I do not have time to fly back and forth and I am therefore staying at an Extended Stay Hotel close to company Z and renting a car and receiving a per-diem to help offset expenses.

Issue:

Company X is withholding NJ state income taxes and not AZ state income taxes in my paychecks.

Question:

Since I am on a short-term assignment (less than 12 months) is it correct for them to withhold New Jersey income taxes in my paycheck? And if this is the case, do I need to file a partial-year return with AZ and NJ for this tax year? Or do I have to pay both Arizona and New Jersey state income taxes for income on this work arrangement?

Thanks for your help.

AtlantaTaxExpert

Yes, the withholding of NJ taxes is correct and proper, as you WILL need to file a tax return as a non-resident of NJ and you will owe some NJ taxes.

Arizona will definitely tax you on the money earned in NJ, but, in all likelihood, will give you a tax credit against the Arizona taxes owed for the NJ taxes paid.