Schedule W for PA resident filing DE non resident income tax

[user17711871756]

I reside in PA though work in Delware.  My employer required everyone to work remotely three days per week as they did not have office space.  Working remotely was not for convenience.  DE income taxes were withheld as if worked in DE everyday.  How do you attach Schedule W for Delaware non-resident state income tax to document days working outside of Delaware?

[DianeW777]

Let's take this one step at a time. Keep in mind the Schedule W should be completed without any intervention once you follow the steps below to enter your W-2. There is no reason for concern because you are making entries to correctly report your wages for both Delaware (DE) and Pennsylvania (PA).

1. First, figure out exactly how many days you worked in DE for the year. 
2. Next, divide that number by the total days you worked during the year. Result is the percentage of income earned while working in DE
3. W-2 Entry should be two states:
   1. PA and state wages for the days worked in PA
   2. DE state wages for the days worked in DE - enter all the DE withholding in this line also
   3. Complete your W-2 entry
   4. Go through the DE return first so that you have the correct taxable wages and the tax paid to DE (not withholding)
   5. Go through the PA return you will select Taxes and Credits > Continue to add DE it not already there.
   6. On the screen 'Do you have any double-taxed income from Delaware?' Be sure to put the same wages for you (Your Amount)  in the slot as is reported on the DE return
      1. It will be the amount you entered in the W-2 correctly for DE (2. above).
   7. This is reported on PA Schedule G-L

You can view the PA tax summary by using the steps below and look for your credit on Total credits and payments.

See details below for how this works for the Other State Tax Credit. 

State Returns - Your resident state requires you to include all worldwide income. Assume both states require income tax returns to be filed: 

1. Report the income on each state return that is from the nonresident state
2. Report it on your resident state and receive credit for taxes paid to another state.

Credit for taxes paid to another state is allowed by a resident state when the same income is being taxed to another state.  Your resident state does not want you to pay tax twice on the same income. The credit that is allowed will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

In most cases complete your nonresident state first.

@user17711871756 

[user17711871756]

I understand how to calculate wages to be taxed in DE and PA.  When filing a DE non-resident income tax, to reduce the income to be taxed in DE, per DE income tax requirements, you are required to fill out Schedule W to complete the calculation as well as to explicitly document each working day you worked outside of DE and the reason (cannot be for convenience to work from home).   This must be included in your income tax submission to document the difference of wages on your W-2 versus what you are submitting for your taxes.  

I can do as you describe above but you do not get at Schedule W which is required for DE tax requirements.  Aftter posting the above, I called Turbo Tax  support which confirmed that DE Non-resident form on TurboTax does not have the Schedule W.  Without that form the software is useless.  As only in the office two days per week (required to work from home as the employer does not have sufficient office space), only 40% of the income is taxed in Delaware.    While your proposed solution calculates the proper tax, it does not provide the proper documentation required for the state of Delaware for non-resident income tax.

[DaveF1006]

You’re correct—TurboTax doesn’t support Schedule W (Apportionment Worksheet), which Delaware uses to verify why you’re only paying tax on part of your W-2 wages. Without this form, the state may view the lower wages as an error and could send a bill for the difference. Since TurboTax can’t create or e-file Schedule W (PIT-SCW), you’ll need to use other methods to stay compliant.

 

The Problem: The "Documentation Gap"

When you manually change the "Delaware Source Income" in the software, TurboTax correctly changes the tax math, but it fails to generate the supporting Schedule W. If you e-file, the state of Delaware receives a return where your wages on Line 1, Column B (Delaware Source) are lower than Column A (Federal), with no Schedule W attached to explain the "Out-of-State Days."

The Solution: The "Print and Mail" Method

Since the form is required but not in the software, you must file a Paper Return. E-filing is not a viable option for you this year if you want to be fully compliant with the documentation requirements.

1. Step 1: Download the Standalone Form Download the official Delaware Form PIT-SCW (Schedule W) directly from the Delaware Division of Revenue website. 
2. Complete the "Days Worked Outside" section manually.
3. Since you are working from home due to employer space constraints, this meets the "necessity of the employer" requirement (as opposed to personal convenience).

Step 2: Prepare the TurboTax Return

1. Continue using TurboTax to calculate the correct wages (the 40% as you described). 
2. In the Delaware interview, when it asks for your Delaware source wages, enter the amount calculated on your manual Schedule W.
3. Do NOT E-file. When you reach the "How do you want to file?" screen, select "File by Mail."

Step 3: Assemble the Mailing Packet Delaware is strict about the order of attachments. Your envelope should contain:

1. Form PIT-NON (The main return printed from TurboTax).
2. Schedule W (The form you completed manually).
3. A Copy of your W-2.
4. A Copy of your PA Return (Delaware requires this for non-residents to verify income sourcing). 

One Final Compliance Tip: The Employer Letter

While Schedule W is the primary form, Delaware auditors often request a letter from your employer for work-from-home claims. Since your reason is "insufficient office space," having a brief signed memo from your HR or manager stating that "remote work is a requirement of the position due to facility capacity" will make your return bulletproof against a future "convenience of the employer" challenge.