Received two W2's from same employer due to working in NY but living in PA

[omonsalve]

I received two W2's from the same employer for NY and PA with different information in boxes 14 through 20. I read through some of the other forums and entered two different line items per state. My question is, do I need to file an NY State also even though I didn't live in NY? If not, do I select the NY state wages as non-taxable in PA?

Thank you for your help.

[DavidD66]

You need to file a New York non-resident return.  If you worked in New York, your income earned there is taxable by New York.  Because you are a PA resident, your New York income is also taxable by PA.  You will receive a credit for tax paid to other states on your PA return for the tax you paid to New York; however, the credit may not be as much as the tax you have to pay New York.  

[omonsalve]

Hi David,

Thank you for your response. Another detail I left out is that I'm a permanent remote worker and have always lived in PA. Currently, when filing a NY non-resident return, it shows that I have to pay NY back which doesn't make sense to me if I never lived in NY. Your help is much appreciated.

Thank you.

[DianeW777]

Yes, your income is considered as New York (NY) source income (see below). Prepare your NY return first then prepare your Pennsylvania (PA) return and TurboTax will carry the credit over for you.  As indicated by @DavidD66 see the information below.

The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income.  As the resident state all worldwide income must be included.

The credit for tax paid to another state on the same income will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

If you are a New York State nonresident you must file Form IT-203, Nonresident and Part-Year Resident Income Tax Return, if you meet any of the following conditions:

• You are a nonresident with New York source income and your New York adjusted gross income Federal amount column (Form IT-203, line 31) exceeds your New York standard deduction.
• You want to claim a refund of any New York State, New York City, or Yonkers income taxes withheld from your pay.
• You want to claim any of the refundable or carryover credits available.
• You had a net operating loss for New York State personal income tax purposes for the tax year, without having a similar net operating loss for federal income tax purposes.

Nonresidents: New York source income

For nonresidents, New York source income is the sum (with adjustments for special accruals) of income, gain, loss, and deduction from:

• real or tangible personal property located in New York State (including certain gains or losses from the sale or exchange of an interest in an entity that owns real property in New York State or owns shares of stock in a cooperative housing corporation where the cooperative units relating to the shares are located in New York);
• services performed in New York State;
• a business, trade, profession, or occupation carried on in New York State whether or not as an employee (see TSB-M-10(9)I, Income Received by a Nonresident Related to a Business, Trade, Profession, or Occupation Previously Carried on Within New York State); and
• a New York S corporation in which you are a shareholder (including installment income from an IRC § 453 transaction).

@omonsalve