We know about the tax agreement between the states, but are confused as to whether we can just file NJ, even though PA taxes were withheld.
She must file both. The employer should have been withholding NJ taxes only, unless she worked in Philadelphia.
If you are a New Jersey resident and your employer withheld Pennsylvania income tax from wages, you must file a Pennsylvania non-resident return to get a refund. To stop the withholding of Pennsylvania income tax, complete Form REV-419EX, Employee’s Nonwithholding Application Certificate, and give it to the employer.
She will then have to file a NJ resident return. She might be assessed underpayment interest and penalties there.
She must file both. The employer should have been withholding NJ taxes only, unless she worked in Philadelphia.
If you are a New Jersey resident and your employer withheld Pennsylvania income tax from wages, you must file a Pennsylvania non-resident return to get a refund. To stop the withholding of Pennsylvania income tax, complete Form REV-419EX, Employee’s Nonwithholding Application Certificate, and give it to the employer.
She will then have to file a NJ resident return. She might be assessed underpayment interest and penalties there.
Also see:
<a rel="nofollow" target="_blank" href="https://www.state.nj.us/treasury/taxation/njit25.shtml">https://www.state.nj.us/treasury/taxation/njit25.shtml</a>