I live in NJ and work in PA. I paid PA income taxes. Why do I owe NJ taxes?

[re2boys · Accepted solution]

If all your PA income is from W2 wages, you should not be paying any income tax to PA .  PA and NJ have a reciprocal agreement.

1.  File REV419 ASAP to stop the PA withholding.

2.  Read this:  http://www.state.nj.us/treasury/taxation/njit25.shtml

3.. Prepare your federal return.

4.  Prepare a PA non-resident return showing zero compnesation and request a full refund of the taxes withheld.

5. Prepare a NJ resident return showing all income, including that earned in PA.

6.  Make sure that you claim a credit for taxes paid as local taxes to a PA municipality.  There should be an amount on line 41 of your NJ 1040