State tax filing

The detailed response is not exactly how New York (NY) tax law works.  If you have NY source income (employer is physically in NY) then you are required to pay tax to NY and then get a credit for taxes paid to another state on your resident return of PA.

You stated the following: My employer's primary office is based in New York and the employer withheld the full NY state tax for the year. They withheld the tax because of the NY tax law.

• New York Nonresident filing information (Rules for Nonresident)
• You must file Form IT‑203 if you meet any of the following conditions:
  • • You have income from a New York source
    • • a business, trade, profession, or occupation carried on in New York State whether or not as an employee (see TSB-M-10(9)I, Income Received by a Nonresident Related to a Business, Trade, Profession, or Occupation Previously Carried on Within New York State); 

When completing your return in TurboTax, be sure to complete the Nonresident New York tax return first in order to ensure the credit for taxes paid to another state, pull into your resident state tax return correctly.

The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income.  As the resident state all worldwide income must be included.

The credit for tax paid to another state on the same income 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

@PANYtax