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pduckrey
New Member

If I live in NJ and work in PA and pay Philadelphia city wage tax, how do I complete software to ensure I am not completing PA State tax?

 
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Accepted Solutions
AnthonyC
Level 7

If I live in NJ and work in PA and pay Philadelphia city wage tax, how do I complete software to ensure I am not completing PA State tax?

I am going to assume that your employer correctly withheld only NJ taxes from your W2 besides the Philadelphia local tax.  If that is not the case, then comment back and I can add further instructions.

Local taxes are not covered by the reciprocal agreement between NJ and PA, so you don't get a direct refund of these taxes from PA.  However, you can use these taxes as the basis for a Credit Paid to Other State.  So, instead of getting a refund from PA for the taxes paid, you can use the taxes paid to reduce your NJ tax liability (and thus get a larger refund from NJ).

You will need to enter this information in the NJ program, however.  Look for the screen below (see first screenshot) - you will want to select "Work on Credit" when you get to this screen (if you already went through this screen, then you might get a screen that says "Summary of Other Taxes Paid" instead of the screen below).

The next screen you will select PA and then the next screen is where you will select what type of local tax you paid.  Pay close attention to this PA specific screen (you will likely need to check one of the small checkboxes and then select No.  After you hit No, you will be prompted to fill out the information for what local tax you paid and how much.  The program will then calculate a credit for you on your NJ return based on the taxes paid to the locality in PA. 

Note:  You might not get a full credit for the whole amount of taxes paid - this is normal, the calculation accounts for the double taxation effect and doesn’t necessarily give you an entire credit for the amount paid. 

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3 Replies
AnthonyC
Level 7

If I live in NJ and work in PA and pay Philadelphia city wage tax, how do I complete software to ensure I am not completing PA State tax?

What type of taxes were withheld on your W2?  Did your employer correctly account for the reciprocal agreement and withhold NJ state taxes, but you have Philly wage tax?  Or, did your employer withhold PA state tax and PA local tax?
AnthonyC
Level 7

If I live in NJ and work in PA and pay Philadelphia city wage tax, how do I complete software to ensure I am not completing PA State tax?

I am going to assume that your employer correctly withheld only NJ taxes from your W2 besides the Philadelphia local tax.  If that is not the case, then comment back and I can add further instructions.

Local taxes are not covered by the reciprocal agreement between NJ and PA, so you don't get a direct refund of these taxes from PA.  However, you can use these taxes as the basis for a Credit Paid to Other State.  So, instead of getting a refund from PA for the taxes paid, you can use the taxes paid to reduce your NJ tax liability (and thus get a larger refund from NJ).

You will need to enter this information in the NJ program, however.  Look for the screen below (see first screenshot) - you will want to select "Work on Credit" when you get to this screen (if you already went through this screen, then you might get a screen that says "Summary of Other Taxes Paid" instead of the screen below).

The next screen you will select PA and then the next screen is where you will select what type of local tax you paid.  Pay close attention to this PA specific screen (you will likely need to check one of the small checkboxes and then select No.  After you hit No, you will be prompted to fill out the information for what local tax you paid and how much.  The program will then calculate a credit for you on your NJ return based on the taxes paid to the locality in PA. 

Note:  You might not get a full credit for the whole amount of taxes paid - this is normal, the calculation accounts for the double taxation effect and doesn’t necessarily give you an entire credit for the amount paid. 

View solution in original post

sadristi
New Member

If I live in NJ and work in PA and pay Philadelphia city wage tax, how do I complete software to ensure I am not completing PA State tax?

Hi I have similar situation.  I live in NJ and worked in Philadelphia of PA.  Due to reciprocity, I do not need to file tax for PA (I came to know that from TurboTax.  Thank you).  Now, I need to file NJ tax and Philadelphia tax.  NJ tax filing I can do on TurboTax.  But, Philadelphia local tax, I have to do it outside of TurboTax.  I followed steps exactly as described above.  Very helpful.  I clicked the small check box to get credit for paying Philadelphia Tax and clicked no on another line below (as shown on 3rd screenshot above).  The confusion I am having are these:  On my NJ State section of W-2, I see on box#16 (State wages, tips, etc) showing 35,097.  However, box 17 (State income tax) is left empty.  So, does this mean my employer did not withhold any NJ state tax?   And on Federal filing section of W-2, I see box 15 (State) showing empty, box 18 (Local wages, tips, etc) showing 37,050 (slightly higher than the box 16 for NJ).  And box 19 (Local income tax) showing 1,280 and box 20 (Locality name) showing PHILADELPHIA.

In summary, On NJ section of W-2, It looks like NJ state taxable income is mentioned, however, no NJ tax is withheld.  Then on Federal section of W-2, Philadelphia taxable income is showing (slightly higher than that of NJ taxable) and the Philadelphia locality tax withheld (1,280).  Now, can I say I have been double taxed and get credit for Philadelphia tax paid?
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