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Withholding requirements for Unincorporated Contractors in NJ

February 11, 2016 | By More

New Jersey Taxation

Withholding Requirement for Construction Contractor Services in NJ

Below is a much forgotten law that affects many businesses including owners of rental properties.

New Withholding Requirement for Construction Contractor Services Effective January 1, 2007

Under Chapter 85, P.L. 2006, all persons and businesses, other than governmental entities, homeowners, or tenants, maintaining an office or transacting business in New Jersey and making a payment for services rendered to resident unregistered, unincorporated contractors or nonresident unregistered, unincorporated contractors must deduct and withhold from the payment a tax equal to 7 % of the amount paid.

The purpose of Chapter 85, P.L. 2006 is to ensure that the income taxes of resident and nonresident persons engaged in businesses are properly withheld and paid over to the State of New Jersey pending the filing of a New Jersey Gross Income Tax or Partnership Return. The Act takes effect immediately, but applies to payments made on or after January 1, 2007.

All persons and businesses including those that own real estate and contract with unregistered, unincorporated contractors for repair and construction services to buildings (rental properties, investment properties, etc.) not deemed as their principal residences need to follow this.

NJ-550 Filing and Payment
The filing and payment of amount withheld is required for each calendar month, in which payment is being made to unincorporated contractors not providing proof of registration described above. Form NJ-550 and associated payment, are due on or before the 15th day of the month following the close of the calendar month in which the payment was made.

Contributed by Kathy Croghan – Registered Tax Preparer
1040 Accounting is located in Nutley, New Jersey. For more information or to contact Kathy Croghan, visit http://www.1040-accounting.com

Article information should not be used exclusively to make legal, financial or tax decisions. Because laws and rules can change frequently, topics may not always be updated to reflect these changes or may not apply to your unique situation. It’s prudent to seek out the advice of a professional for your specific needs.

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