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bhmistry · Feb 14, 2011, 12:07 PM

During complete year 2009 and 2010, I worked and lived in chicago IL at client site but my employer is NJ based so they withheld taxes for state NJ in my pay check? Upon asking they would not rectify this situation. I have to file both state tax returns and NJ wanted to get me a letter from employer with reason why wrong state tax were withheld, which my employer refused to give. So I didn't get all tax refund , NJ charged me with taxes. Can I report them to NJ dept of revenue for not withholding my resident state taxes? I know they are not registered in IL.

Thanks in Advance.

ebaines · Feb 14, 2011, 12:27 PM

The question is: were you a resident of IL of NJ during this time? I assume you submitted IL resident tax returns for both years and also NJ non-resident tax returns for both years, where you document that you had $0 NJ-source income, and hence are due a full refund from NJ. It's unfortunate that your employer withheld NJ taxes, but I'm wondering what home address did they show on your W2? If your employer is using a NJ address for you that's a problem, as it is evidence that your intent is to not change residences. In response to NJ's findings you should provide them a copy of your IL resident tax return, and also documentation such as copies of your apartment rental agreement and IL voter's registration card, to show that your intent is to be a permanent IL resident. Also, I assume that you were NOT collecting a per diem during this time - correct? Because if you were, that's more evidence that you dd not intend to permannetly relocate out of NJ.

As for reporting your employer to the NJ tax authorities - what good would that do? Instead, you should get them to stop withholding NJ taxes and register with IL so they can properly withhold IL taxes. If they won't, then you will have to file quarterly estimated income tax payments with IL or face the risk of being penalized by IL with interest payments for underpayment of income taxes during the year.

bhmistry · Feb 14, 2011, 01:29 PM

I am getting my pay checks @ IL address, also on w-2 IL address is shown. I am renting here for past 2 years and have all utility bills, lease and my driving license from here too.I have filed NJ -NR tax return both year. I didn't understand the per Diem part. I get paid on hourly basis and the client contract is long term. (as long as I want to work with client) I had asked them to withhold IL taxes and stop NJ withholding which they were not willing to do. And told me they don't intend to register in IL and didn't gave a clear explanation. Also lets say if I need to claim unemployment or disability where would I claim? (I m not sure which state would approve it.)

ebaines · Feb 14, 2011, 01:41 PM

I asked about per diem because often when an employee is sent to work at a client's site it is intended to be a temporary assignment, and the employer pays a "per diem" to help cover living expenses while away from home. If you were receiving a per diem it would be evidence that you do not intend to relocate to IL, but rather are there for a temporary assignment only.

Did the employer say why he won't give a letter explaining why they withheld NJ taxes? If not - you should write a letter to the NJ division of taxation and explain the situation. Include a copy of your drivers license and lease.

As for unemployment: it's a good question, but not one I have an answer to.
You might want to contact the IL Department of Revenue and ask what recourse you have.

bhmistry · Feb 14, 2011, 02:15 PM

Employer did not give letter because they verbally said to me they may get audited from NJ if they give letter on why they were not deducting IL state taxes, so they had not given the letter. This reason was given verbally so I don't have paper-proof. I think they may be trying to put this as a short term situation (my work at client, though I am working here for 2.5 years) to get away form paying IL state taxes themselves (which I think they should, since they are getting income from IL) and on this thought I am thinking about inquiring IL dept of revenue for my eligibility of unemployment benefits. Can I ask them to check why my employer not paying their IL tax? I don't get paid anything extra besides the hours I work at client site. And nothing on pay stub mentions that this is to cover living expense in IL for me.(I live here with my family, we all moved when I came here ) so I think per Diem thing is not valid here since I am here for more than 2 and half year at same location.

ebaines · Feb 14, 2011, 02:35 PM

You're right - a per diem payment is not valid here, as it is limited to use for only temporary assignments (which is why I asked, to verify that your employer doesn't view your assignment as temporary). The IRS defines temporary as being 1 year or less, though there can be an exception if an assignment is extended as long as the "intent" is that it should be a year or less.

I'm not sure what to advise next. It would be prudent to check with the IL tax authorities. HOWEVER, be aware that if you get your employer into trouble they may decide that your services are no longer required - is that a risk you are willing to take? If I were you I think I would work out the situation with the NJ tax authorities to get your refund, pay your quarterly estimated taxes to IL, and pursue the unemployment question only after the NJ tax question is put to bed.

bhmistry · Feb 14, 2011, 02:46 PM

I am sure my employer would not be happy in case I report them, and I don't think they are going to do right thing. But I am thinking of leaving them any way soon. So if this divorce works out fine, I am willing to let this go in past and look in future (employment with IL based employer to avoid all tax issues for future.) If separation is not on good terms, may be I can negotiate my way from them on this things. Thanks for the help.