PA residents working in NJ will file a NJ income tax return then file a PA Income Tax Return (PA- 40). They will get a credit toward their PA income tax obligation for income tax paid to NJ. ... The credit is the lesser of tax paid to NJ or the income subject to tax in both states times 3.07%.
If you only worked for one company then your W2 should show two lines for state taxes wiethheld. One line for PA and one line for NJ.
TurboTax will ask you the questions needed to make sure you are paying the correct state taxes.
If you received two W2 forms from the same company and the only difference is the state income and taxes withheld, then you will only have one W2 entry and add another line for the second state.
Pennsylvania and New Jersey are reciprocal states for state income tax. As a worker in a reciprocal state, you can fill out that state's exemption form and give it to your employer if you don't want them to withhold taxes for your work state. If you do this, make sure your employer also withholds taxes for your resident state, otherwise you may get hit with underpayment penalties come tax time.
[edited 2/17/2021 | 7:38 pm PST]
Go back and edit your W-2 (search for w-2 and use the link to go to w-2 summary). Verify you have entered the correct numbers in all of the boxes. Double-check the amounts in Box 1, 16, and 17. That error message is indicating that you have an amount in Box 17 that is greater than Box 16. Make sure you have the correct state codes listed also. If you have entered everything correctly, you will need to get a corrected W-2 from your employer as the withholdings can't be more than your wages for any state.
For future tax returns, if you work in New Jersey and are a resident of Pennsylvania you do not have to pay New Jersey income taxes on your wages. You would submit exemption Form NJ-165 to your employer. @jdellis19
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