I've been based with a NJ agency through my recruiter who is based in NY. I don't receive checks from the agency in NJ, they are not "technically" my employer, my employer is my recruiting agency. They bill the client for and amount, take their cut then issue me a check. Therefor why am I paying taxes for NY and NJ? Although I physically work in NJ technically the company I work for is based in NY. Please advise what I should expect to have taken out of my check.

If you physically live or work in NY, then you are subject to NY state income taxes. Because your recruiter is based in NY, the default position is that you too are working in NY.

Now, if you ARE an independent contractor, NOTHING will be taken out of your check, as you are being paid under Form 1099-MISC.

If you are NOT located physically in NY while working or living outside of work, you have no legal obligation to pay NY taxes or file a NY tax return.