I live in Delaware but work in Philadelphia, PA. I received two w-2 forms from my employer. One form has the PA wage taxes and the other has DE. What do I do?

[DanielV01 · Accepted solution]

You are correct.  You will be filing a Pennsylvania nonresident return and a Delaware resident return.  Your income is taxable to both states, but you will receive a credit from DE on the tax you must pay to PA on the same income.  To accomplish this, you will prepare the PA return first so that the credit can be accurately calculated and applied.  Here is an FAQ on this:  https://ttlc.intuit.com/replies/3302052

One thing to watch out for:  if the W-2 repeats the Federal Income (box 1) amount on both box 16 amounts for PA and Delaware, TurboTax will initially calculate that your Delaware income is actually twice as much as it really is.  If this happens, you should see a screen about double-taxed income on the Delaware return.  This is the PA income, on box 16 of the PA line.  This will remove the extra income so that your tax is accurately calculated for Delaware.

[joncrist14]

Thank you so much for this information!

[DanielV01]

You're very welcome.

[tbb1]

Thanks for the info. I have a follow up question..

I live in Philadelphia and work in DE, how much of my income is taxable for local income taxes?

(Box 19 of the PA W2)

[AmyC]

Your resident city and state will tax your wages in full.While the state will give you a credit for taxes paid to other states, the city will not give credit for state tax paid.

@tbb1

[jh27]

I also work in Delaware and live in Philadelphia.  My company deducts Delaware (non-resident) wage taxes from my paycheck. It does not deduct city (Philadelphia) wage taxes from my paycheck.  I will have to send city taxes to Philadelphia (3.8%).  My question is: Will Delaware give me credit for the city taxes I pay, or will the city taxes be ADDED to the Delaware state taxes?  I understand that I will owe $0 to the state of Pennsylvania, as they will give me credit for Delaware state income taxes paid, and Delaware income tax rate is higher than Pennsylvania's. I also understand that the city of Philadelphia will not give me credit for (non-resident) state taxes paid to Delaware, so I will definitely have to pay 3.8% to Philadelphia.  My question is whether Delaware gives any credits/deductions/refunds for city taxes paid to the city of Philadelphia? 

[DaveF1006]

No Delaware will only give credit for a state tax but not for a city tax.  

[ilikebeetles]

I am in the same situation as the OP: live in Delaware but work in Philadelphia...somewhat.  I work for a Texas-centered corporation that has work locations in many states, including the work location I was hired for in Philadelphia.  The employer address on the W2 indicates a Texas address but the employer's name on the W2 is listed as "[Company Name] of Pennsylvania LLC".    The W2 indicates taxes were paid to my home state of Delaware and also to the city of Philadelphia.  In normal times, I would be physically commuting to a work location in Philadelphia.   However, because of the pandemic, I've been working remotely from my home in Delaware for more than 3/4 of 2020.   My guess is that working remotely has no effect on the states I pay taxes to, correct?  In my situation, should I be filing a PA state tax return that shows my full gross adjusted income for this job, pay whatever PA tax amount calculates, and then apply my PA tax payment as a deduction on my DE state tax return?  Am I understanding this correctly?  Thanks in advance.

[JotikaT2]

You are correct.  Working remotely does not affect the state you pay taxes to.  As it sounds like most of your income is sourced to PA, you will still need to file in PA as a nonresident.

You will then be able to claim a credit on your resident DE return as a credit for taxes paid to another state.

PA filing requirement

[ilikebeetles]

Thought so...thank you for confirming!

[Jdsherm45]

So I’m in the same situation. Live in Delaware and work in Philly. My W2 came back with a Federal, DE state, but  not a PA state. Just had a City and Local. When I tried to file for PA only my wife was coming up as having PA and nothing for me. They stopped taking city wage out but all the information they shared looked like I should still get a PA W2.

should I have gotten a W2 for PA or is this my company considering me a remote worker for 2020? 

[ErnieS0]

@Jdsherm45 It depends. If your employer did not withheld Pennsylvania income tax then they consider you to be a Delaware employee. PA may disagree, The Department of Revenue says:

In summary, if an employee is working from home temporarily due to the COVID-19 pandemic, the department does not consider that as a change to the sourcing of the employee’s compensation. For non-residents who were working in Pennsylvania before the pandemic, their compensation would remain Pennsylvania sourced income for all tax purposes, including PA-40 reporting, employer withholding and three-factor business income apportionment purposes for S Corporations, partnerships and individuals.

I suggest discussing your status with your employer as these cases are very facts and circumstance based. If they are comfortable classifying you as a DE employee you can either exclude your income from your PA return and possibly face an audit or include it and pay PA tax.

Related Resource:

• Telework During the COVID-19 Pandemic