I worked in PA for 4 months and live in Del. TT said I would get $900 from PA but PA Tax Team says I get $0. How did TT get so wrong?

[chrislasmith]

I worked in Pennsylvania for 4 months in 2016, but lived in Delaware.  The other 8 months, I worked at Delaware firms.  During my time working in PA, my employer deducted PA (almost $1200) and DE (over $600) taxes from my paycheck.  I went through TT Home & Business, bought the PA state return and e-filed, and was expecting almost $900 in refund from PA, as that was what TT showed.  However, I received letter from PA Dept of Revenue stating that they adjusted tax return and now my Tax Due/Refund = $0.  How could this be so different from what Turbo Tax PA state said I would receive?

[KatyS]

1) fill out the entire Federal part first...everything..do not start the state parts until Fed is fully filled out.  The state parts will assume a lot of income items are taxable in their state....but only until you actually work thru the state tax forms.

2) Then do the PA non-resident tax return..in there you will mark the PA W-2 as PA taxable income, and everything else as not PA taxable.   The extra $ are not removed from PA taxation until you actually run thru the PA interview.

3) Finally, go thru the DEL interview. DEL assesses a tax on "Everything", even the PA income...BUT as you go thru the interview, look for a question about taking a credit for taxes paid to another state....that section allows you to take a credit for the taxes that PA kept (which is why the PA non-resident tax return has to be done before DEL)

4) You get the credit for the PA taxes paid in your DEL return.

[chrislasmith]

Thanks for the feedback, Katy S, but that looks to follow what I did.  Went back through my TT filings and all of the above seems to match.  TT filled out the proper non-resident form and showed my PA taxable income being roughly 25% of what the PA Dept of Revenue said in their letter ($38K vs $9K).  From looking at the PA forms when I e-filed, the lower taxable income is a calculation based on the fact that I only worked about 25% of my working days in PA in 2016, so my taxable income is reduced to that number by TT.  I did properly fill out the 'taxes paid to another state' in my Del return.  I've tried calling PA Dept of Revenue number in the letter but it rings busy constantly.  Seems that is only way to get to the bottom of this.  Still disappointed that TT is telling me one thing (all tax form check steps passed or else I wouldn't have been able to e-file in early March) that is different than what PA is telling me.

[chrislasmith]

Spoke to PA Dept of Revenue and I will be getting $0 from them.  The TT PA state return had me count the number of days I worked in PA in 2016, which was about 25% of the year.  It appears the TT PA state return then calculated $38K as my full year's salary but only counted $9400 as my AGI (25% of my earnings in PA), even though all my W-2's for the year (three) told a different story.  Disappointed that TT didn't provide proper direction on this one, because in hindsight, it seemed odd that it was asking me for the number of days I worked in PA.  More disappointed that I was setup to think I was getting a $900 refund instead of $0...

[re2boys]

The figures you are listing for PA indicates that you may have been a part-year resident of PA.  But your original description would only be correct if you were a full year DE resident who worked  some in PA.  Totally different reporting.  Katy S. answer applies if you were a full year DE resident.

If you were a part year resident of both PA and DE, then you would divide your income into two pots, one is the income you earned as a part-year PA resident, the other is the income earned as a part-year DE resident.  That is how PA is apportioning your income.

So were you a part year resident of PA in 2016, as PA is claiming????
Or were you a telecommuter working for a PA company but worked from DE for your own convenience???