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Unemployment nj tax form 20174/7/2024 Because ZapCo has no business activity within New Mexico, it is not required to withhold New Mexico resident income tax from Joe’s wages. Joe does not work from his home office in New Mexico. Employee Joe is a resident of New Mexico who travels to the Utah office each day for work. ZapCo maintains a business office in Utah, and its employees provide no services outside of the state. Example 1 - no business activity in resident state On the other hand, if that employee performs services within the resident state, including substantial work from the home office, or other employees work within the state, income tax withholding is required for all residents in the state. While state and local laws vary in their application of nexus, what is clear is that an employee’s mere residence in a state is likely insufficient to establish a requirement that the employer withhold resident income tax from those wages. They are different, but both must be satisfied. In the Quill (1992) case, the US Supreme Court made clear that there are two nexus requirements, one under the due process clause (minimum contacts) and the other under the commerce clause (substantial nexus). Resident income tax withholding can be imposed only if the state can assert nexus, or put another way, the state can demonstrate that the employer’s activity within the state is sufficient to establish a business connection. For example, if an employee resides in New Mexico but works in Utah, can New Mexico impose an income tax withholding requirement? The answer to this question hinges largely on nexus. But if the employee lives in one state but works in another, the employer’s income tax withholding obligations are more complex. When the employee’s work and resident state are the same, this requirement is straightforward. With some exceptions as stipulated under federal and local law, an employer is required to withhold income tax in the jurisdiction where employees work. Do I have to withhold resident income tax? Here we will explain the general guidelines for determining if resident income tax withholding is required and the risks and benefits of courtesy withholding. Nonetheless, even when not required to, many employers withhold resident income tax as a courtesy to their employees. Income tax withholding is a key obligation that is part of having a workforce, but when it comes to the state and local jurisdictions where employees reside, it’s not always a requirement that taxing authorities can impose on employers.
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