Okay, I worked in Philadelphia for 3 months in 2020 and lived in NJ. Am In supposed to fill out a tax credit for taxes paid to other states for Philadelphia?

[FalconX]

I worked in Philly from January to March.  I then had to work from home in NJ for the rest of the year.  Do I apply a tax credit for the taxes paid to the city of Philadelphia during those 3 months?  I didnt pay NJ state tax during those 3 months.  Is that normal?  Also what is Double-taxed income?

[DavidD66]

If you were a resident of New Jersey while you were working in Philadelphia, that income is taxable by both New Jersey and Pennsylvania.  In order to prevent double taxation, you will receive a credit on your New Jersey resident tax return for the tax you paid to Pennsylvania.  You will need to file a full year resident tax return for New Jersey and non-resident return for Pennsylvania.  Prepare the Pennsylvania non-resident first in TurboTax.  If you paid, Philadelphia city tax, there is no credit or offset for that.

[FalconX]

That doesnt make any sense.  Why would both NJ and PA double tax me for wages earned in PA?  On my W2 I only have NJ listed as my state.  Also how can I file a resident tax return for PA and a Non resident return for PA? 

[DavidD66]

I made a typo.  You will file a non-resident for Pennsylvania and Resident for New Jersey.  The income earned in Penn is taxable by NJ and Penn, but your state of residence (NJ) will give you a credit on your NJ tax return for the tax you paid to Penn.

[FalconX]

I didnt earn any income in PA though. I earned income in Philadelphia and paid the city wage tax.  On my W2 it says NJ under State in box 15 and in box 20 it says PhilaNR.  Isnt there an agreement between PA and NJ that they will pay tax to their home state?  I dont think this extends to Philadelphia which is why I only had city wage tax withheld. 

Sorry I dont mean to be annoying. 

[FalconX]

Sorry I just found this.  Does this apply to my situation?


https://www.state.nj.us/treasury/taxation/njit14.shtml

[LenaH]

Yes. You must file a New Jersey Resident Return and a return for Pennsylvania. Per the Pennsylvania Department of Revenue website, they do not have a separate form for nonresidents. Rather, it must be indicated on the tax form itself that you are a nonresident. In addition, Philadelphia does not have a separate income state tax return; it is combined with the Pennsylvania state return. 

As it states in the link you provided, "the New Jersey/Pennsylvania Reciprocal Agreement does not apply to income or wage tax imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania. That means a New Jersey resident who works in Philadelphia and pays city wage taxes can claim a credit for the taxes paid to Philadelphia".

This means that you must file a New Jersey resident return and a Pennsylvania return marked non-resident. You will pay the Philadelphia tax to Pennsylvania and get a credit for it on your New Jersey return. 

The first thing you want to do is make sure you've filled out the Personal Info section correctly:

1. With your return open, select My Info in the left-hand menu.
2. Then, on the Personal info summary screen, scroll down to Other State Income, and select Edit.
3. At the Did you make money in any other states? question, answer Yes and make sure your nonresident state(s) are selected from the drop-down.
4. Select Continue to return to your Personal info summary.

After you finish your federal return, you'll automatically move to the State tab, where you'll see your nonresident state(s) listed in addition to your resident state.

To ensure accurate calculations, always complete the non-resident (PA) return first if filing in multiple states because your resident state (NJ) will give you a credit for taxes paid. 

@FalconX