TP said they moved to AZ from N.J. and their HUD (AZ home purchase) is dated late 2009. Is this possible and if so can I file a non resident for N.J. return stating TP did not reside there during 2010 thus refunding his N.J. withholding on his unemployment?
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New Jersey
I've worked on cases like this, with a similar fact pattern, where they lost their job in one state, moved to another state, and then collected unemployment from the state where they had been working.
My gut reaction to your question was going to no, because on an intuitive level, the unemployment compensation is still sourced to New Jersey, because his right to receive that income arises out of his prior employment there.
However...
In New Jersey, unemployment compensation is not taxable, to residents or nonresidents.
See page 16 of the instruction book for Form NJ-1040NR.
So the obvious question is why was tax withheld? Your client should certainly get a refund.
Are you sure the tax was withheld and paid over to New Jersey and not Arizona?
I realize that the unemployment checks came from New Jersey, and the 1099-G was issued by the New Jersey agency. But is it possible that the New Jersey agency withheld tax for Arizona, based on the fact that he was living there when they issued the checks?
I think in New Jersey, anything is possible.
BMKBurton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process. -
Koss, you are NOT going to believe this...
Then again you may. 3 - NJ issued 1099-G's, one has Fed withholding, the other 2 do NOT. No state withholding. So which one does TP use? I am guessing the 1 w/WH would be mailed into Fed if this was a paper file. I more concern about TP recieving NJ UE and not residing there. Looks like that will be ok to file non resident N.J. reporting NO income earned in NJ..
Thanks for the help Koss.Comment
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Unemployment
To me, the more interesting question is whether the unemployment compensation is subject to taxation by Arizona. And I have no idea.
It sounds like you're an Arizona tax pro, so I'm sure you'll figure it out. My point is that at least in theory, the unemployment compensation could be sourced to New Jersey, so it might not be taxed by Arizona, even though he was living there when he received it.
Similar questions arise with respect to traditional pension plans, where someone spends 30 years working in one state, and then retires and moves to another state. Each state has its own way of attempting to deal with this sort of thing. Of course, some states don't tax retirement anyway.
Perhaps the better analogy, although it's far from perfect, is what happens when someone moves on January 1, after quitting a wage earning job. Their final paycheck is often issued on or after January 1, so the wages earned during the final pay period in December will show up on Form W-2 for the following year. The analogy is that in this scenario, the taxpayer received income in one year that he actually earned the previous year. And he earned it while living and working in one state, but then received it while living in another state. So which state gets to tax it?
Your client didn't "earn" the unemployment compensation in New Jersey, but he didn't earn it in Arizona, either. It's unearned income. Which is what makes it so interesting...
BMKBurton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process.Comment
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I'm confused. If there was no state withholding, and NJ doesn't take it, why do you need to file a NJ return at all?Originally posted by AZ-Tax View PostComment
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