Yes, it is very disappointing. I have been using Turbotax for 20 years and never had a problem until now.
This is not only Turbotax fault, but also NJ Division of Taxation for not having clear instructions on how to deal with refunds received from City of Philadelphia for the previous years. As I stated in my previous message there is no place in the NJ forms to properly apply the refund. The only way you can do it by filing amended return for the years you received the refund. But who wants to go through this pain of filing first the petition for refund with city and then filing another tax return with the state in order to pay pretty much the same amount? Not only my taxes were incorrectly calculated, but for me it was not worth the time and effort because my NJ tax rate is about the same as Philadelphia wage tax rate (3.465%). The only time it has some financial sense is if your final NJ tax rate is much lower than fixed City wage tax rate. Base on NJ rate schedule it may happen for people in the lower tax bracket (less than $35K for singles/$70K married). By shifting the income tax to NJ they may pay less in taxes.
I hope that this explanation will help someone not to fell in the same trap as I did.
