need help with State tax filing*UPDATE

[deelam]

I am trying to help my little brother with his taxes. He lives in NJ where he pays no rent or property taxes. He works in Philadelphia. Does he have to file his state taxes in Philly, or is he supossed to file in NJ? He does have quite a bit of interest income that was paid in NJ, I don't know if that makes a difference though.

 

[Bob Slydell]

I don't know anything offhand about NJ or PA state taxes, but I think he probably needs to file in both states.

Were the taxes taken out of his paychecks paid to PA or NJ? My guess is it's NJ, but since he was living in PA, he owes PA taxes (and will get a refund from NJ).

Again, I don't know if this is necessarily true, though.

 

[Crankyshank]

I don't know about NJ or PA law, but as someone who worked in MA and lived in RI I had to file for both states because MA income tax was taken out of my check. However, DH works in MA and has RI taxes taken out of his check so he no longer needs to file MA income tax return.

 

[deelam]

I don't know anything offhand about NJ or PA state taxes, but I think he probably needs to file in both states.

Were the taxes taken out of his paychecks paid to PA or NJ? My guess is it's NJ, but since he was living in PA, he owes PA taxes (and will get a refund from NJ).

He lives in NJ and worked in PA. The taxes paid were to PA. Do you think I would still file a NJ and File a PA return? Would I mail the returns separately?

 

[Bob Slydell]

He lives in NJ and worked in PA. The taxes paid were to PA. Do you think I would still file a NJ and File a PA return? Would I mail the returns separately?

Oops, sorry, I flip-flopped the work and home states.

Yes, with the situation you described above, like Crankyshank mentioned, he would need to file in both states. He'll get a refund from PA and he'll owe in NJ. Yes, you'd file them separately, as they'll be going to two different places (assuming you're not e-filing).

 

[golfgal]

Do NJ and PA have a tax reciprocity agreement?

 

[deelam]

Oops, sorry, I flip-flopped the work and home states.

Yes, with the situation you described above, like Crankyshank mentioned, he would need to file in both states. He'll get a refund from PA and he'll owe in NJ. Yes, you'd file them separately, as they'll be going to two different places (assuming you're not e-filing).

That makes sense, but since he doesn't pay property taxes or rent would he have to file a NJ return at all. When I ran his return thru the TAX Cut software everyhing under state (NJ) came up with all zeroes?

 

[SC Minnie]

Dh works in NC, I work in SC and we live in SC. He has to file NC for his and SC for mine as well as Federal

 

[salmoneous]

In general, you owe taxes in both the state you live, and the state where you earn the money. Usually you would first calculate your taxes in the state you work, filing as a non-resident. Then you would fill out your taxes in the state you live, paying tax on the same income(!), but getting a credit for taxes paid to other states. Note that you have to file in both states, even if you end up owing one state no money.

However, PA and NJ have a "Reciprocal Income Tax Agreement". Which means that a NJ resident shouldn't be taxed on a salary earned in PA. If his employer didn't deduct anything for PA taxes, all he has to do is file his NJ taxes. If his employer did deduct for PA taxes, he also has to file in PA to get that money back.

Hope this helps,
Sal

 

[deelam]

In general, you owe taxes in both the state you live, and the state where you earn the money. Usually you would first calculate your taxes in the state you work, filing as a non-resident. Then you would fill out your taxes in the state you live, paying tax on the same income(!), but getting a credit for taxes paid to other states. Note that you have to file in both states, even if you end up owing one state no money.


Hope this helps,
Sal

This helps allot. So, if I have this correct, he needs to file PA, then NJ because he didn't pay anything to NJ state. When I did his NJ on tax cut, I must have done something wrong.

I am wondering if I should file the PA taxes with the NJ taxes since there is the reciprocal agreement.

 

[tar heel]

My mom lived in NC and worked in VA for years. She had to file both, but she usually got pretty much everything back from VA and paid in NC.

 

[robsmom]

live in south jersey, dh work in PA, i used to work in philadelphia. Ignore the advice from those above dealing with other states. they are correct for some states but not NJ/PA

1. As a NJ resident he should have zero taxes for PA taken from his pay. NJ and PA have reciprocity. he needs to immediately have his employer stop taking PA taxes. He needs them to start taking NJ. He has to tell them that he is legally a NJ resident. Rent/property taxes is not relevant is he legal lives in NJ (does he live with his parents?),

2. If he works in Philadelplhia he is liable for phila city wage taxes. This should come out of his check. there is no need to file a return as long as the taxes were withheld. i never filed with the city. just let them keep their share.

3. Unless his employer can retroactivley fix this he will probably need to file in PA for 2005 just to get his money back. his liabiity is zero so he should get back 100% of what they took. Normally he will not have to file a PA state return.

4. As a NJ resident he files in NJ and is taxed on all income including interest and his PA job. On his NJ return he files for a "credit for taxes paid to other jurisdictions". This is to get a credit related to what he paid PHILADELPHIA. since the taxes to PA were not legal and he will get them back he can not get a credit for what they took out for PA.

Be prepared for a bit of a cash flow issue. i would file PA to get it back asap so maybe you can get the refund before you have to pay NJ.

 

[deelam]

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4. As a NJ resident he files in NJ and is taxed on all income including interest and his PA job. On his NJ return he files for a "credit for taxes paid to other jurisdictions". This is to get a credit related to what he paid PHILADELPHIA. since the taxes to PA were not legal and he will get them back he can not get a credit for what they took out for PA.

Be prepared for a bit of a cash flow issue. i would file PA to get it back asap so maybe you can get the refund before you have to pay NJ.

So he has to file PA for a refund, and then file NJ to pay. He doesn't work for this company anymore, so we don't have to worry about having them straighten anything out. I have a feeling that this is going to be allot of work for a very small refund. If the refund turns out to be less then $20 does he have to file a return at all?

 

[robsmom]

Normally there is no deadline for filing for a refund. if it is small and you want to let PA keep it you probably can. He does need to pay NJ. I assume he didn't make too much at this job so if they only took $20 of PA he shouldn't owe NJ too much.

 

[deelam]

Normally there is no deadline for filing for a refund. if it is small and you want to let PA keep it you probably can. He does need to pay NJ. I assume he didn't make too much at this job so if they only took $20 of PA he shouldn't owe NJ too much.

No I just used $20 as an example. My little brother made about 8000 from this company. All the state taxes went to PA. I'm not sure what the exact amounts were, I think it was a few hundred dollars. If NJ has to be paid, I guess he should file a return.

 

[robsmom]

Unless he can go back to his former employer (which seems unlikely) the only way to get the couple hundred out of PA is to file a PA return and it is probably worth filing it to get that money.

 

[deelam]

i'm really confused now...I just fininshed his return and he owes $130 to PA. NJ came up all zeroes using Turbo Tax. I wonder if we really should pay the $130 to NJ. Does anyone know what to do.

 

[salmoneous]

It sounds like Turbo Tax is leading you down the wrong path. You're probably better off getting the forms and instructions and doing this by hand. In particular, here is the key part of the PA-40 instructions...

Resident for a Reciprocal State Filing for a Refund
If you are a resident of a reciprocal state working in
Pennsylvania and your employer withheld PA income tax,
you may request a refund of the PA tax. You report zero
taxable compensation on Line 1a, and the PA tax withheld
on Line 13. Submit a legible photocopy of your Form W-2,
a signed copy of the resident income tax return that you
filed with your resident state (without the supporting forms
and schedules), and a statement explaining that you are a
resident of a reciprocal state.

 

[deelam]

It sounds like Turbo Tax is leading you down the wrong path. You're probably better off getting the forms and instructions and doing this by hand. In particular, here is the key part of the PA-40 instructions...

Resident for a Reciprocal State Filing for a Refund
If you are a resident of a reciprocal state working in
Pennsylvania and your employer withheld PA income tax,
you may request a refund of the PA tax. You report zero
taxable compensation on Line 1a, and the PA tax withheld
on Line 13. Submit a legible photocopy of your Form W-2,
a signed copy of the resident income tax return that you
filed with your resident state (without the supporting forms
and schedules), and a statement explaining that you are a
resident of a reciprocal state.

Thank you so much!!!..I'm going to try and print the form online from the PA's state website.I'm going to follow your instructions. I'm exhausted now, we just got back from the Italian Market in Philly.

 

[deelam]

Resident for a Reciprocal State Filing for a Refund
If you are a resident of a reciprocal state working in
Pennsylvania and your employer withheld PA income tax,
you may request a refund of the PA tax. You report zero
taxable compensation on Line 1a, and the PA tax withheld
on Line 13. Submit a legible photocopy of your Form W-2,
a signed copy of the resident income tax return that you
filed with your resident state (without the supporting forms
and schedules), and a statement explaining that you are a
resident of a reciprocal state.

I will be doing this, butwhat about the NJ return. The tax cut software is coming up as all 0.