Bonus tax withheld for both NY and PA - how much should I get back?

[tennisfan2424]

Looking for some help as I'm a bit confused on credit for taxes paid to another state. I graduated and started a job with a company in NYC in July. They paid me a signing bonus in May when I was still living in PA.

Using illustrative numbers: say the bonus was $10k and they withheld $1k for NY state tax and $500 for PA state tax. Only NY state tax was withheld from future pay stubs as I moved to NYC right before my job started. When I file, how much should I get back for credit for taxes paid to another state? And how should this credit be split among the two tax returns?

[ErnieS0]

If I’m understanding your question correctly, you received a lump sum, one-time signing bonus while you were a Pennsylvania resident and are not being paid in installments.

If you received a one-time payment, claim a credit on your part-year Pennsylvania tax return for the tax paid on the whole bonus amount since you were a PA resident when received the bonus.

Your bonus is also taxable to New York even though you were not working in NY because it is connected to NY employment.

On the PA other state credit form (Schedule G-L), you’ll have to calculate the NY tax amount since your NY return will include the total tax on your entire NY income. For example, if your bonus was $10k and your total NY income was $100k, you would report $10k as double-taxed income and 10% ($10k/$100k) of your NY tax liability (IT-203 line 50) as tax paid on double-taxed income.

There is no credit on your New York tax return because you claimed the credit on PA and the rest of your income was earned while living and working in NY. File a part-year NY tax return.

[tennisfan2424]

Thank you. Looking at the PA Sch G-L, PA Resident Credit is calculated as the lesser of tax paid in the other state and .0307*(income subject to tax in the other state). So in this case, would it be right to be comparing $1000 (tax paid on bonus in NY) and .0307*($10k) = $307 and receiving credit of $307 (effectively just receiving credit for the PA withholding)?

[MaryK4]

That is correct- the purpose is to avoid double taxation of the same income at the state level.  (Note that if you would have also paid the tax in a state with a rate LESS than Pennsylvania, you would have had to pay Pennsylvania the additional amount to equal the state tax due.) @tennisfan2424