NJ Resident and Non-resident returns and PA return, Double Taxed Income

[N2024]

I am a bit confused and am hoping someone can help with NJ and PA returns.

I worked in NJ and lived there for less than 6 months.  I also owned a home in NJ which I sold in the first half of the year.  I moved to PA while still working in NJ.

The forms generating are a Resident NJ return and a Non-resident NJ return showing that I owe money for each return.  Is it correct to have two NJ returns and owe money for both?

My employer took out state income tax for each NJ and PA. The PA return shows I also owe money.

When the question of "Did you earn any income from NJ sources while living in another state?" comes up I hit "Yes" because I did earn my income from NJ while living in PA.  Is that correct?  I am aware another user had an issue with that question.

And do I need to fill out the PA Schedule G/L form?

[MindyB]

No, for this situation you should mark "No", you did not earn income in another state.  This is because New Jersey and Pennsylvania have a reciprocal agreement, meaning you pay taxes to your home state, no matter that they were earned in either PA or NJ.

You should only answer "Yes" to that question if you have non-wage income, such as a gain from your NJ home sale, which remains taxable by NJ even after you move (above the exclusion which is $250,000 for a single and $500,000 for a married couple on a home that was a primary residence for at least 2 of the last 5 years). 

To fix the issue you are experiencing, you likely need to delete the NJ non-resident return, verify your move dates on the NJ part-year resident return, and then only use PA Schedule G-L to claim a credit for any taxes you paid to NJ on the home sale profit (but not your wages).

Correcting the question should change the forms that are generated.  You'll file a part-year resident return for each state, if you only have wages to report.

Here is more information on reciprocal states: What is a state reciprocal agreement?

[N2024]

Thank you, Mindy, for your help.  I do have income from the sale of my NJ home (above the exclusion).  So then I should answer "Yes" to the question if I earned income in another state?  Then how do I fill out the PA Schedule G/L form?  That is not clear to me.

On the PA state section it is asking me if  I have double taxed income.  I said "No" and then it is asking for gross compensation, dividend income, etc.  It would seem that I have to fill this out because the NJ Resident return and the NJ Non-resident return are both asking me to pay taxes.  Do you agree?  I appreciate your time.

[MaryK4]

Just to clarify- Yes, you will indicate that you made money in another state.  So your nonresident New Jersey return will report the sale of your home.  You will then be able to apply the credit for the taxes paid to another state on your Pennsylvania return.  @N2024 

[N2024]

@MaryK4thank you very much.  When I ran the returns the NJ Resident return reports the sale of my home.

My other question is how to handle when the PA State asks me if I have double taxed income. I said "No" and then it is asking for gross compensation, dividend income, etc.  Is that correct?  I am not sure how to fill that out because the directions aren't clear to me and:

1. On the NJ Resident Return, NJ state income taxes were taken from my income.

2. On the NJ Non-Resident Return, NJ asks what I earned as a PA resident and then wants me to pay more income taxes.

3. On the PA Return, PA state income taxes were taken from when I moved to PA.

@MindyB 

[N2024 · Accepted solution]

For how to handle when the State asks me if I have double taxed income. I said "No".

If anyone needs an answer on filling out the numbers, I just found it for this matter of Double-Taxed income.  I found a previous post on April 9, 2022.  For the left column enter the total income earned and on the right column enter the part of income that is for your new resident state.

If I am incorrect, please let me know.  Thank you, everyone.

@MaryK4 @MindyB