The only way that you would be able to get a state refund of your IN withholdings would be to file a nonresident IN state income tax return but report $0 IN sourced income. (This is due to the fact that PA and IN have a reciprocal agreement so no IN tax credit would be allowed on your PA resident state income tax return.)
In
order to get the full refund of your IN state income tax withholdings, you will
need to file a nonresident IN return but report zero "0" income from
IN. You need to file your IN return
this way because PA does not allow a credit for tax paid to a reciprocal state
on wages, salaries and commissions. If tax was withheld by a reciprocal state
(IN), you must file directly with the state for a refund of those taxes. You
must mail in this IN nonresident state income tax return and include your state
W-2 information. You will want to include an explanatory statement with your IN
return stating your situation (that your IN employer withheld IN taxes from
your wages in error due to the reciprocal agreement with PA).
