I am looking for a straight cut answer of how to best proceed with my w2 for future. thanks!
Mark that you earned income in another state.
Prepare a NY nonresident return first declaring your wages earned in NY. Then prepare a PA resident return showing ALL income regardless of where earned. Be sure the PA return contains a Schedule G giving you credit for taxes paid to the "other" state. If you had little income other than your NY wages, you may show a zero balance on your PA return as NY has a higher tax rate.
Any unused portion of taxes paid to NY may be used to offset your local earned income tax that you also must file, TurboTax will not help you with the local.
It depends. However, for your situation, both are allowed to tax your income. New York taxes you as a nonresident, and PA taxes you as a resident. When this is the case, your resident state (PA) will give you a credit for the tax you must pay to NY on your income. NY does have a higher tax rate than PA, so it is likely you do not pay PA tax at the time you file your return.
However, you do not want to start having PA tax withheld instead of NY tax. NY gets priority as far as who receives the tax first as long as you work there. Your employer will be required to withhold and remit (send) your taxes to NY on that income unless you are a military spouse only present in NY because of your spouse's marching orders. Otherwise, you are required to pay NY taxes. If these are not withheld, you will owe a substantial amount and will likely face penalties and interest payments for not having paid in enough New York tax. (Yes, you'd get a larger PA refund, but you'd end up losing in the exchange).
Does this hold true for the opposite? I'm a resident of NY working in PA. I'm a employee of the postal service and just moved to NY. The postal service says they wont withhold both state taxes from my paycheck even after begging them to but I'm fearful of the repercussions that may hold. Are they required to withhold these taxes?
@Mothic4 :
If you live in NY and work in PA, your work income is taxable by both states.
If the postal service will only withhold taxes for your work location in PA, you may want to start making quarterly estimated tax payments to NY. That's because NY's income tax rate is considerably higher than PA's. So, although you'll be able to take a credit on your NY return for the taxes paid to PA on the income taxed by both states, the credit will only cover a portion of your NY tax obligation - leaving you with a balance due to NY.
You can find information about NY estimated taxes here: https://www.tax.ny.gov/pit/estimated_tax/default.htm
As far as the state taxes is concerned, yes, the same rule does apply. NY is allowed to tax all of your income as a resident of NY. PA will tax all of your income earned in PA, and NY will apply a credit for the income tax you pay to PA for the income you earn there. I cannot comment on whether the postal service is obligated to withhold NY tax, but you are correct in ensuring the consequences, because you are still responsible for the final result.
For argument's sake, let's assume that your NY tax liability is greater than your PA liability. In that case, although NY provides you a credit for what your PA tax liability is (withholdings plus additional owed or minus PA refund), you still will owe NY the difference. If that difference is large enough, you could owe underpayment penalties. If this is the first time that you owe, there is a good chance that you can request NY to waive the penalty. However, if the postal service cannot withhold the difference for NY, you will want to begin making quarterly (estimated) payments to close the gap.
The following website provides additonal information: Who must make estimated tax payments? (NY). (Wages, while not listed on this site, do qualify as qualifying taxable income. Withholdings towards PA that are credited towards NY should count as if they were withheld to NY). You will be safe from penalties if you owe less than $300 after reconciling your tax return. If you find out that you should make estimated payments, NY allows you to do so at this website: Making NY Estimated Payments
"Are they required to withhold these taxes?"
No. They are only required to withhold for the work location state. Many corporations, with employees in a similar situation, do it for them. But, the situation is rare enough that it does require some special effort
"Can i just pay the cheaper state?"
The answer is a straight out NO.
Hi dear are you still working in pa coz i moved from ny to central pa but my job is still in ny and i m having same concerns as you
@Shahzad5 READ the reply directly above the message you just posted. It covers this issue completely.
My situation is similar:
I work in New York and lived in New York until 2/25/2019.
i purchase a home in PA and moved into my home on 2/26/2019.
I commute daily from PA to New York for work .
I am a part year resident for both states?
How do i file my taxes ?
@Minnie pallet - Yes, you are a part year resident of both states. The income up to 2/26/19 is allocated to NY. After the move, the income is reported to BOTH states. You claim a credit, on the PA return, for the tax paid to NY, but only on the NY tax paid on the Feb 26 -December 31 wages
@Hal_Al Thank you, do i have to file two different state returns on turbo tax? if so once i complete the two state returns is there anything else i ll have to do or turbo will take care of everything?
Yes, you have to file and pay for two different state returns on turbo tax. There's an additional fee to efile the PA return (NJ efile is free but not the return preparation). If you need to pay one (or both) of the states, you'll need to send payment.
I did pay additional states PA and NY. However I see the system did not calculate the tax that I paid to NY as credit to PA return and it still shows I need to pay full tax on PA and the tax credit was not factored in Schedule G.
On your PA return you should be receiving a credit for taxes paid to NY State. This credit will show up on your PA-40 on line 22 as Resident Credit. Generally NYC does not tax non residents except if they are NYC Employees. Please work all the way through the NY return (non resident) prior to completing your PA return.
U looking to do mutuAL swap i live in central pa n wrk in manhattan
I wish Turbo Tax knew as much as you do. I've filed for years via Turbo Tax with no Schedule G, amazed that they never suggested it. Thank YOU.
Will Net York tax the entire income earned, regardless if all of it was earned in NY? My W2 has NY taxing all of earned income and PA only taxing a part of it (earned in PA).
Because of this, do I say all wages were earned in NY? Then still do a schedule G?
@amber_isom -- If you are a resident of New York, New York can tax ALL your income, regardless of where you earned it. A non-resident state can tax you on income you earn from working within that state. But NY will give you a credit for tax you pay to the non-resident state, so that you won't be double-taxed.
In TurboTax, be sure to complete the non-resident state return first, before your home state return, so that the program can calculate the credit and apply it correctly.
Additional question on this same situation. I live in PA ( Bucks County) and work in NYC for about 8 years now. One thing I never figured out is the local earned income tax which here is ( 0.5% of your wages). For the most part my company never withheld this and i just never filed anything for this because I thought it was only for peiple living and working in Bucks County but now I am hearing mixed messages on this. Also if I am liable to pay the local country tax, can the NY state taxes I pay ALSO be applied as a credit towards this local tax in addition to the credit i get towards the PA state tax?
@ccm3185 -- See this as to whether or not you must file a local income tax return:
https://www.keystonecollects.com/forms/download/I110a.pdf
And see the instructions for Line 12 on Page 3 of this reference, regarding taking an out of state credit:
https://www.keystonecollects.com/forms/download/ITRInstructions.pdf
A tip: next time you have a question, it's better to post it as a new question rather than tacking it on to a old thread that may have started many months ago.
What percentage will be deduct compare to NY? If someone live in PA and work at NY? Also, just out of curiosity, is there any one do car pool PA to NYC ? Or help me to find best route ? I’m moving in next month (September2020). Thanks in advance
Hi, I have question with respect to your state tax (PA) return. I live in NJ but work in NYC. The way my taxes work are pretty simple. I pay state taxes at the NY State rate and at the end of year when I do my taxes I somehow get a credit from NY for essentially the difference between NY and NJ rates. for example, NY withholds 10K, but in NJ that income tax would have been 7K, then I end up getting 3K back from NY State ( an actual check). Income tax rates are slightly higher in NY than in NJ. Given everything that's going on now and with working from home now more of an option than 8 months ago, I am entertaining a move to Doylestown PA. and I am just wondering how the state tax aspect works. From what I have read income taxes are even cheaper in PA compared to NJ and obviously NY, so going back to my example, if say I move to PA, would I get back say 4-5K from NY State at the end of the year?
Once you move to PA, ALL your income becomes taxable by PA, regardless of its source.
If you continue to work in NY after moving to PA, your income from working in NY (or from working remotely in PA for your own convenience for a NY employer) will also be taxable by NY. In that circumstance you'd file a non-resident NY tax return in addition to your home state PA tax return. You'd be able to take a credit on your PA return for the taxes paid to NY on the income taxed by both states, so you wouldn't be double-taxed. But the amount of the credit would not exceed what your PA tax bill would have been if the entire amount had been taxed only by PA.
In the year that you move, you'd file as a part-year resident of each of the two states.