Live in NJ work in PA and pay a municipal tax

[sgruver78]

I know NJ and PA has a reciprocal tax agreement so I should not have to fill out a PA tax return but I have been getting conflicting information on the municipal tax I pay to the town of where I am employed.  Can I get a tax credit if I am paying to this municipality in PA even though I live in NJ?  According to the NJ tax page it says "Income From Philadelphia or Other Pennsylvania Municipalities. The Reciprocal Agreement does not apply to the wage or income tax imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania. Therefore, income subject to both New Jersey income tax and any municipal wage or income tax may be included on Line 1, Schedule A." Am I reading this wrong or should I be getting some type of return for this municipality tax?  When I enter all my info on turbo tax i do not seem to be getting refunded.

[ChristinaS]

Yes, you can get a tax credit on your NJ resident return for paying local tax to a PA municipality. NJ doesn't have reciprocity with PA localities; it only has it with the state of PA. You just can't get a credit for paying Pennsylvania state income tax.

From NJ instructions, page 44:

http://www.nj.gov/treasury/taxation/pdf/current/1040i.pdf

Income From Philadelphia or other Pennsylvania Municipalities. The Reciprocal Agreement between Pennsylvania and New Jersey (see “Income From Pennsylvania” above) does not apply to the wage or income tax imposed and col lected by the City of Philadelphia or any other municipality in Pennsylvania. Therefore, income subject to both New Jersey income tax and any municipal wage or income tax may be included on Line 1, Schedule A.

The local tax credit is addressed in Turbo Tax in the Credit for Taxes Paid.

The example below uses Philadelphia, but the gist is the same if its not Philly.

https://ttlc.intuit.com/questions/3484428-philadelphia-wage-tax-is-a-credit-that-almost-covers-your-...

As far as not seeing a benefit on your return, its possible that you are entering it wrong. We can't see inside your return to see all the particulars of your income and how you addressed this, but you certainly are permitted this credit.

[EAAcct]

Does a NJ resident need to file a Local Earned Income Tax return for the municipality withholding their employer shows on their W-2?

[ErnieS0]

It depends on the municipality. Many municipalities in Pennsylvania have mandatory filing, meaning you have to file a return even you if you have a $0 balance (no refund or tax due).

Check with your payroll department or tax-collecting municipality. Most municipalities use third-party collectors such as Berkheimer or Jordan Tax Service.

@EAAcct