State tax filing

1. Yes, you do need to enter prior year contributions that were taken as a deduction with different rules for 2005 and before versus 2006 and later. PA DOR states: 

Distributions from an IRC Section 529 College Career and Savings Program Account not used for qualified educational expenses are taxable and reportable as interest income on PA Schedule A and Line 2 of form PA-40. The cost recovery method must be used to determine the taxable amount for contributions made in tax years 2005 and earlier. The total amount of distributions that were claimed as deductions for tax years 2006 and later is taxable.

2. The program does ask questions about your PA 529 distribution. You will need to lie to the program to get the correct taxable amount on your program. When it asks about contributions made in 2021 and earlier years, enter zero since it is all taxable.

3. No need for a separate set of filing since you can enter zero in PA for the basis to show fully taxable in the worksheet using steps from #2. 

Here is the visual of the input screen and the worksheet.