I live in IN, but commute weekly to PA to my job. I have an apartment in PA, and my house in IN. PA tax was withheld from my check? Not sure how to handle on State tax

[DanielV01 · Accepted solution]

You will file two state returns.  Since you are an Indiana resident, you will file an Indiana resident return.  For Pennsylvania, you will need to file a nonresident return, but your PA income will be zero.  This is because Indiana and PA are reciprocal states and agree that if you live in one, but work in the other, you are taxed where you live and not where you work.  This way, Pennsylvania will refund all of the tax that was withheld to PA.  However, you will have to pay tax on this income to Indiana.  However, you may have your employer take out taxes to Indiana instead of PA by filing the correct form with them.  Please see this FAQ for more information:  https://ttlc.intuit.com/replies/4776822

In addition, if you pay a local tax in Pennsylvania, this is not part of the reciprocal return, but you may claim a credit for these local taxes on your Indiana return.  This will be in the Indiana State Return under Other Deductions and Credits. 

I am providing a few screenshots to assist you.  The first two show how to exclude the income in the PA return (example shows NY info, but you'll choose the PA info instead), and the third shows the Indiana Credit Screen:  

[cmfish]

Thank you for the very detailed answer.  I had worked my way through the forms and had figured out how to handle the reciprocity issue within TurboTax.  The part that really stinks is that IN does not give you any slack for ignorance of the IN tax code.  They slapped me with penalties and interest for either not withholding or paying estimated tax.  That part really stings when PA has been getting my money for all of 2016, so it wasn't like I was just sitting on the tax money collecting interest.  I won't make this mistake again.

[DanielV01]

You can apply to Indiana to see if they can waive the penalties and interest for this year, but you are correct that you want to get this fixed right away.  The FAQ I sent you shows the form you will fill out in PA.