The State of New Jersey has issued guidance recently on how to account for the new Federal Employment Retention Credit on New Jersey Tax Returns. The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before September 30, 2021. The credit was put in place to assist employers in maintaining employment levels during the Covid 19 Pandemic. More information on the general credit can be found at the IRS website or by contacting Levine Jacobs & Co.
The details from the State as detailed by Thomson Reuters is as follows:
• New Jersey—Partnerships—Guidance on New Jersey employment retention credit.
The Division of Taxation has advised that there is no provision in the New Jersey Gross Income Tax Act that allows for federal tax credits or that would allow for the add back of expenses for New Jersey gross income tax purposes when a partnership takes the employment retention credit. Consequently, partnerships are required to report the reduced expenses on Form NJ-1065 in the same manner as reported for federal purposes. (N.J. Div. of Taxation, Employee Retention Credit, 02/25/2022.)
• New Jersey—Personal Income Tax—Guidance on New Jersey employment retention credit.
The Division of Taxation has advised that there is no provision in the New Jersey Gross Income Tax Act that allows for federal tax credits or that would allow for the add back of expenses for New Jersey gross income tax purposes when a partnership takes the employment retention credit. Consequently, partnerships are required to report the reduced expenses on Form NJ-1065 in the same manner as reported for federal purposes. (N.J. Div. of Taxation, Employee Retention Credit, 02/25/2022.)
• New Jersey—Corporate Income Tax—No New Jersey deduction for expense disallowance for employee retention credit.
The New Jersey Division of Taxation has advised that for C corporations completing the CBT-100, CBT-100U, or the BFC-1 and S corporations completing the CBT-100SA, New Jersey does not permit an additional deduction for disallowed expenses related to the employee retention tax credit that were included in federal taxable income even though the taxpayer could not claim the ERTC for New Jersey Corporation Business Tax purposes. (N.J. Div. of Taxation, Employee Retention Credit, 02/25/2022.)
For More Information on the Employment Retention Credits please reach out to your contact at Levine Jacobs.
Richard Hoffman, CPA
Senior Partner