Deferred Compensation Earned in NJ is Taxable in NJ

New Jersey has addressed the tax treatment of deferred compensation received by nonresident hedge fund managers under IRC §457A.

Under federal law, hedge fund managers who deferred compensation into accounts in offshore banks under IRC §457A must, in 2017, report and pay federal income tax on this deferred compensation.

For New Jersey tax returns, hedge fund managers source the deferred compensation to New Jersey if it was attributable to New Jersey when it was earned. Income earned in New Jersey is subject to gross income tax, regardless of where the taxpayer resides when reporting the income. Hedge fund managers must report the compensation as income in New Jersey in the same tax year as they report it as income on their federal income tax returns.

Deferred Compensation Received by Nonresident Hedge Fund Managers Under IRC §457A, New Jersey Division of Taxation, October 12, 2017, ¶402-107

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CCHTaxGroup

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