Significant Updates Made to New Jersey Payroll and Federal Form W-4

There have been significant payroll related updates made recently.  Here is a brief summary to help you understand the changes.

New Jersey Unemployment, Temporary Disability and Family Leave

As a result of legislation passed in February, there have been significant changes to benefits and eligibility taking effect in 2020.  These benefits have been expanded and will be paid for by unprecedented increases in the various bases and rates for these taxes.

The unemployment/workforce development rate will remain unchanged at .425%.  The wage base will increase from $34,400 to $35,300.  This will increase the maximum unemployment/workforce development tax for employees from $146.20 to $150.03.

For employers, the wage base for temporary disability and family leave will also increase from $34,400 to $35,300.  The employer tax rates were previously sent by the state in July 2019.

For employees, the wage base and tax rates for temporary disability will increase from $34,400 to $134,900 and from .17% to .26%.  The new maximum tax will be $350.74 which is an increase from $58.48.

For employees, the wage base and tax rates for family leave will also increase from $34,400 to $134,900, and from .08% to .16%.  The new maximum will be $215.84 which is an increase from $27.52.

Form W-4, Employee’s Withholding Certificate

The IRS recently released the final version of Form W-4 effective January 1, 2020.  This revised form was the result of the Tax Cuts and Jobs Act which suspended personal exemptions and substantially increased the standard deduction.

An existing employee can choose to leave their withholding as is or complete the new form.  Any new employee is required to complete the new form.

An employee completing the revised Form W-4 can calculate their withholding amount in three ways:

  1. Calculate their own withholding by following all five steps on the new Form W-4.
  2. Calculate using the IRS withholding estimator on www.irs.gov. Having their 2018 Federal Income Tax form available will make the calculation easier.
  3. Complete only step 1 on Form W-4 and have their employer calculate their withholding. Employees can adjust the withholding amount at a later date.

For questions or further information, please contact Sax advisor Alan S. Isaacs, CPA, MBA at [email protected].



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