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SebB
Returning Member

NY resident work remote for PA employer - State Tax?

Hi all

 

I am a resident of NY state and I was recently hired by a company based in PA. So to be clear, I did NOT move from PA to NY.

 

In my first paycheck, I saw that they retained both NY and PA state taxes, and I'm trying to figure out what I can do about the double taxation since it is a hit on my pay.

The PA revenue official site (https://www.revenue.pa.gov/COVID19/Telework/Pages/default.aspx) states:
A non-resident employee who is required to telework full-time from home in another state should treat his compensation as non-Pennsylvania source income even if his employer is located in Pennsylvania. In those situations, the employer is not required to withhold on the employee’s compensation.

 

Now, it seems to be that I should be able not to pay PA state taxes, or at least I should be able to get them refunded?

What do the experts here think?

Thank you

 

7 Replies
Bsch4477
Level 15

NY resident work remote for PA employer - State Tax?

The guidance you cited doesn’t apply in 2022. 

From the same site:


The Department of Revenue previously issued temporary guidance relating to telework and related tax implications during the COVID-19 pandemic: Telework During the COVID-19 Pandemic

This prior guidance linked above is effective until June 30, 2021 (“End Date”). As of the “End Date” the temporary guidance will no longer be applicable and existing tax law will govern.

SebB
Returning Member

NY resident work remote for PA employer - State Tax?

Ok…so what’s the existing tax law for 2022?

Bsch4477
Level 15

NY resident work remote for PA employer - State Tax?

You complete 3 returns. First complete your federal and then a non resident PA return and lastly a resident NY return. NY will give you a credit for your PA tax so you won’t be double taxed. 

TomD8
Level 15

NY resident work remote for PA employer - State Tax?

Here is Pennsylvania's rule on employer withholding:

 

Pennsylvania law requires employers to withhold Pennsylvania personal income tax from employees’ compensation in two common cases:

  • When resident employees perform services within or outside Pennsylvania; and
  • When nonresident employees perform services within Pennsylvania.

https://www.revenue.pa.gov/TaxTypes/EmployerWithholding/Pages/default.aspx

 

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
SebB
Returning Member

NY resident work remote for PA employer - State Tax?

Thank you 🙏 

so, based on what you and Bsch4477 wrote, I will keep paying PA state tax, but when I file taxes they will be credited back to my NY state return…correct?

SundayInSalem
Level 8

NY resident work remote for PA employer - State Tax?

You are correct. New York will give you credit for tax paid to Pennsylvania. Keep in mind, PA's 3.07% flat tax rate is generally lower than NY's graduated rate so NY will only credit you for the amount of tax you actually paid to PA.

 

The NY credit is claimed on IT-112-R-I. TurboTax prepares this form.

TomD8
Level 15

NY resident work remote for PA employer - State Tax?

This is PA's rule for non-resident teleworkers after the Covid restriction was lifted on June 30, 2021:

 

A non-resident employee who is required to telework full-time from home in another state should treat his compensation as non-Pennsylvania source income even if his employer is located in Pennsylvania. In those situations, the employer is not required to withhold on the employee’s compensation.

https://www.revenue.pa.gov/COVID19/Telework/Pages/default.aspx#:~:text=A%20non%2Dresident%20employee....

 

This means that if you're a NY resident with a PA employer, and you're working remotely from a NY location because your employer requires you to do so, and you never physically work within PA, then your income from that work is not taxable by PA.  The key word is "required."  

 

Such an employee would have to file a non-resident PA tax return only if his employer withheld PA taxes.  On that return, the employee would allocate zero income to PA and thus would receive a full refund of his withheld PA taxes.  In that situation the employee would NOT claim an other-state credit on his NY return because he would de facto be paying no taxes to PA.

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
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