how to file local earned income tax if work out of state (PA)

[shelper]

So I live in PA and work in NY

on my W2 there are two pages,

one for NY with box 16 showing NY taxable income, i.e., NY state wage

one for  PA with box 16 showing PA taxable income, i.e., PA state wage

according to my employer, NY  takes all, so, NY state wage becomes my total taxable wage, and PA state wage is 0

Now i am filing my local EIT, i live in Bethel Park, PA, with a tax rate of 1.4% of the state wage 

my question is which state wage should i use for this EIT? NY state wage or PA state wage, or the sum of both?

[ErnieS0]

Your employer is not correct. Your wages are taxed by both New York (because you work there) and Pennsylvania (because you live there).

PA will give you a credit for tax paid to NY but you have to (1) report your wages on your PA-40, (2) claim the credit on your PA return and (3) e-file a copy of NY IT-203 with the PA filing (TurboTax does this for you) to show that you filed a NY return and paid NY tax.

The NY tax rate is higher than PA so your PA state tax (after the credit) will be $0 for your tax liability but not $0 for the wage amount. If you have other PA income (investments, etc.) you may owe PA tax on those items.

Bethel Park

Does your W-2 list a local wage amount (Box 18). That is what you would use for Bethel Park. If the local lines (Boxes 18-20) are blank use the PA wage amount since that is your PA income.

[shelper]

for example, say i only have income on w2, which is 100K for taxable income. 

what you mean is that on my w2, PA state wage and NY state wage should both be 100k?

when i use turbotax to file my tax, although on my w2, PA state wage is 0, turbotax did include NY state wage as my income for PA filing and used NY tax to offset my PA tax.

but i am not sure if that is the case for local tax, as you said, if there is box 18 on w2, i should use that for local tax, but i called the local tax office, they said i should use state wage in box16, 'cus that is what the audition will use. there is no use of box 18, i checked the link you give for Bethel Park, and there is no place i can input the number in box 18 

[ErnieS0 · Accepted solution]

My understanding is that you are saying you have two W-2s (or state tax lines). The New York one has an amount in Box 16 and the Pennsylvania one has $0 in Box 16.

It sounds like your PA-40 is correct if TurboTax is picking up the correct wage amount in Box 1a of PA-40 and including Schedule G/L for credit for NY tax.

I don't see any reason why your employer would add a PA line with $0 wages, unless you had state tax withheld which would be strange.

Use the amount from Box 1a of PA-40 (which should be the same as NY Box 16) as your income for Bethel Park.

[shelper]

Really appreciate your input. I now am much clearer about my tax.

It is exactly what happened: I have two W-2  state tax lines. The New York one has an amount in Box 16 and the Pennsylvania one has $0 in Box 16.

but what does not match your description is that, my NY state wage (w-2 ny line Box 16) is the same as W-2 Box 1 (wages, tips, other comp.) and my PA-40 Box 1a is the same as w-2 Box3 (social security wages).

Does that sound right?

I tried to discuss with my company's payroll people but they cannot give me an affirmative answer...

[DianeW777]

Yes, it sounds right.  Although New York (NY) does conform to most pre-tax items that the federal allows, Pennsylvania (PA) does not.  Most often the PA wage will be higher than the federal (Box 1) wage and can match the social security and medicare wages on the W-2.

As long as you prepared the NY return first as nonresident, then the PA return as resident, then TurboTax knows the correct amount of your credit for taxes paid to another state.  As indicated the 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