State taxes withheld for wrong state

[RickF2]

I live in Ohio.  Pa Employer. Employer shows PA income and Pa state taxes paid for part of the year.  Also Ohio  income and Oh taxes for remainder of year. 

1. How do I get my money back from PA?   File non resident income tax and change the income to $0. have to pay $40 for another state in Turbo tax.

2. Ohio is showing I underpaid and charging $37 penalty.  Anyway to avoid paying the penalty?  

[MaryK4]

1. You will have to file a Pennsylvania tax return with zero income to get the withholding.

2.  The exceptions to the penalty are: 

• Ohio tax due minus any employer withholding for the current year is $500 or less;
• taxes withheld are at least 90% of the tax due for the current year; OR
• taxes withheld are at least 100% of your previous year tax as shown on your 2023 tax return

There are questions in the Ohio section of TurboTax that ask about the exception if you did not go through that section.

If the penalty still applies, it may be possible to avoid the penalty by filing the nonresident Pennsylvania return with the Pennsylvania income, then see if the credit for taxes paid to another state will cancel the penalty, since you have to file Pennsylvania anyway.  

[RickF2]

The reason for the Ohio penalty is Turbo Tax sees the home address as Ohio and aggregates pulls the total income from the federal tax info.  So it thinks I grossly underpaid Ohio income tax which in reality I paid more state tax than required.    The employer is looking into why the switch from Oh to PA happened.  Not sure of they can correct anything on the W@ now or not....so it does show that there was PA income.  I realize the money(state taxes) has been paid to PA and the W2 cannot be changed for 2024. 

[DianeW777]

If your employer is unable to correct your W-2, you can make an entry of zero wages in Pennsylvania (PA), enter the withholding for PA.

PA is considered a reciprocal state with Ohio (OH).  This is why the employer is checking into the reasons for the PA withholding. The will work that out, but for you for now.

• PA Nonresident
• OH Resident

W-2 entry for Box 16 & 17:  zero PA wages, full PA withholding. Second State: all wages in OH (add another state for OH if you haven't done so). This will provide a full refund of the PA state tax withholding, however you will owe OH for any balance due.  There is no cause for concern for this entry because it is the correct action for accurate returns.

Reciprocity:

A reciprocal agreement, also called reciprocity, is an agreement between two states that allows residents of one state to request exemption from tax withholding in the other (reciprocal) state. This can save you the trouble of having to file multiple state returns.

There is no credit for taxes paid to another state in your situation.  Taxes will not be paid to more than one state. At worst you may be asked to send your OH return to PA.  Usually, under e-file they don't request it, but they could.

@RickF2