My state return says “accepted” on turbo tax but when I reached out to PA department of revenue they said I file my unemployment incorrectly. What do I do?

[alternativebydesign]

This is what they told me: “ Hello Cheyenne, The federal government is not 'taking' your PA refund. You are not receiving a refund from PA, because your return was filed incorrectly. Your PA return reported withholding from unemployment compensation, but this is not taxable to PA therefore we do not withhold from this compensation. You have an equal tax return meaning your employers withheld the correct amount of taxes to PA. The $630 reported on the 1099-G was withheld to the Federal government, therefore this would need to be claimed on the federal tax return.”

[Mike9241]

why didn't you ask them? 

[MaryK4]

You need to amend your Pennsylvania (PA) state tax return to remove the incorrect withholding entry and amend your federal return to ensure the $630 withholding is correctly claimed there.  Since Pennsylvania does not tax unemployment compensation, any tax withheld from your 1099-G is federal income tax. You accidentally reported this federal withholding as Pennsylvania state tax withholding, which is why TurboTax showed you a state refund that the PA Department of Revenue (DOR) has now corrected to zero. 

1. Amend Your Pennsylvania Return 
You must remove the $630 from the "Pennsylvania tax withheld" line of your state return.
Wait for Processing: Ensure your original return has finished processing (the "Accepted" status in TurboTax only means it was received, not finalized).
Start the Amendment: In TurboTax, select "Amend a Filed Return" and choose your Pennsylvania return.
Correct the Withholding: Go to the 1099-G entry section. Ensure the $630 is not listed in the box for "State income tax withheld" for Pennsylvania. Leave the state tax withholding box blank for this form.
Your PA refund will likely drop to $0 or whatever amount you actually owe, matching what the DOR told you. 

2. Amend Your Federal Return
The $630 is federal money that you are entitled to get back as part of your federal refund.
Check Your Federal Form: Open your Federal return and look at Form 1040, Line 25b (Federal income tax withheld from forms 1099).
If the $630 is not already included in your total federal withholding, you must amend your federal return to add it.
Enter the 1099-G Correctly: In the Federal "Wages & Income" section, under "Unemployment," ensure the $630 is entered in the box for "Federal income tax withheld" (typically Box 4 on your 1099-G).