PA and NJ have a reciprocal agreement whereby NJ agrees not to tax the wages of a PA resident. Thus, you should not be paying NJ state income tax.
If you are a Pennsylvania resident and your employer withheld New Jersey income tax from your wages, you must file a New Jersey nonresident return to obtain a refund. To stop the withholding of New Jersey income tax, complete an Employee's Certificate of Nonresidence in New Jersey (Form NJ-165) and give it to your employer. When filing for a refund, Pennsylvania residents must enclose a signed statement with their New Jersey nonresident income tax returns declaring that they are residents of the Commonwealth of Pennsylvania. Order an Employee's Certificate of Nonresident in New Jersey, Form NJ-165; New Jersey Nonresident Return, and instruction booklet, or go to our online tax forms.
So:
1. Get that withholding of NJ taxes stopped ASAP. Ask your employer if he will withhold PA taxes, but he is not required to. If he doesn't, you may need to file PA quarterly estimated taxes.
2. Prepare a NJ non-resident return showing zero income and requesting a full refund of all state taxes withheld.
3. Finally , prepare a PA resident return reporting ALL income, even that earned in other states. As a resident of PA, they tax all your income.
If NJ taxes had been withheld, and no PA estimates paid, you will get a sizable refund from NJ but owe a lot of PA taxes, due April 18, 2017.
