07 Feb Can N.J. tax this Florida resident?

Q. I participated in a nonqualified deferred compensation plan in New Jersey run by Darden Restaurants. I retired at age 66 in October 2017 and moved to Florida in December 2017. In January 2018, I received my first mandatory distribution, from which Darden withheld 9 percent of my check for New Jersey income tax. Florida has no income tax. What can I do here?
— Unsure

A. Congrats on your retirement!

Lots of people have fled New Jersey during retirement to take advantage of more tax-friendly states.

But you said this is a nonqualified deferred compensation plan, and that makes all the difference.

The New Jersey tax withholding from your distribution was correct, said Gail Rosen, a certified public accountant with Wilkin & Guttenplan in Martinsville.

She said the nonqualified deferred compensation that you receive, even as a non-resident, is subject to New Jersey tax.

However, Rosen said, if any distribution payments are considered pension income – reported to you on federal form 1099-R – they are nontaxable to you as a nonresident and no New Jersey income tax should have been withheld.

“The 9 percent New Jersey tax withheld will probably be higher than what you will owe to New Jersey,” she said. “For 2018, you will file a New Jersey non-resident return and I expect that you will get a refund for the difference between the actual New Jersey tax and the amount that was withheld.”

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