In Which State Do I File Double Taxed Credit?

[Lentil]

I moved permanent residences from PA to MA in August 2021and am filing part time resident returns in both states. I am continuing to work for two companies that are in PA. One company has double taxed income while I am living in MA (taking income tax for both states in every check), while the other has taken only MA taxes since I left the state.

Do I file for double taxation credit in MA, PA, or both? And should that only include the job that double taxed or do I need to figure out the tax potentially owed on the company that only taxed the state in which I was a resident at the time? These numbers would only be for the time period I lived in MA if I am understanding correctly.

[MayaD]

No, you don't need to claim the credit. 

Follow the instructions in the link below to allocate your earned income between the 2 states. 

How do I allocate (split) income for a part-year state return?

[TomD8]

When you do the part-year returns, allocate to PA only the income you earned as a PA resident.  PA will refund any excess taxes withheld.

[Lentil]

The problem is that I was being taxed as a PA resident by one of the jobs in the 4 months following my move out of the state. So it's not about allocation, it's about being taxed twice on the same income that should have been allocated only to MA. According to the W-2, I did not pay excess PA state tax because it was being reported as PA income when I was out of state already.

MA has Form 1-NR/PY and PA has PA-40/41 GL that both cover the situation, but I am not sure if I file that just in MA as being double taxed there, in PA as that is where the tax and company are located, or in both as to cover the section in each W-2 that belongs to that other state.

[TomD8 · Accepted solution]

PA does have a “convenience of the employer” rule for remote workers. If after your move to MA you worked remotely for the PA employer because it was convenient for you, not because it was necessary for the employer, then your income after the move would be taxable by both states.

In that case, you would claim an”other state credit” on your MA return, since MA was your state of residence when the double-taxed income was earned.

[Lentil]

Thank you - After looking into the rule, that actually clears up why the one employer double taxed and the other did not, based on my duties at each of the companies.

So in this scenario, Pennsylvania would not consider the MA income tax a double taxation since I was not a resident at the time, even though it was considered PA taxable income?

[TomD8]

Correct.  The “other state credit” is granted by the resident state (with a small handful of exceptions all involving California).