Deducting NJ taxes when you work in PA but live in NJ

[jefar]

What is the name of your state (only U.S. law)? NJ

I moved to NJ in 2009, but was still paying PA taxes. Because of the reciprocal state agreement I did not have to pay NJ taxes. For 2010, I was told by a fellow coworker that we didn't have to pay NJ taxes because they were taken out from our property tax. I didn't have PA or NJ taxes deducted from my paycheck in 2010 but I did pay Philadelphia state tax. The tax software I am using states that while I don't owe anything to PA I now owe almost $1100 to NJ. Why is it that my coworkers who live in NJ and work in PA don't owe NJ taxes?

 

[pattytx]

Taken out of property tax? No. Property tax and income tax are completely separate.

Your Philadelphia withholding can be used as a credit against your NJ income tax liability, but since no PA tax was withheld, you're pretty SOL for the NJ tax.

So, during the entire year, there was no state income tax withheld and you never asked payroll WHY?

 

[FlyingRon]

You are confused. The reciprocal state agreement says you pay the tax in the state in which you RESIDE but not in the state you work.

You *MUST* pay the NJ income tax if you are a resident.
Property taxes mean squat other than there's a pretty healthy (at least there used to be) homestead exemption that you claim on your NJ Income Tax (that way even renters get it).

You need to contact your employer with your residence status and get your withholding fixed.

You need to pay the taxes (and probably a penalty) to NJ for 2010 and file with PA to get the withheld payments refunded.

You probably want to go back and fix 2009 with partial year returns as well. I believe NJ taxation is more favorable to you than PA.

 

[davew128]

For 2010, I was told by a fellow coworker that we didn't have to pay NJ taxes because they were taken out from our property tax.

Don't take tax advice from coworkers.

but I did pay Philadelphia state tax.

Although the Phillies are a remarkable team, winning the World Series does not turn the city into a state.

 

[pattytx]

You probably want to go back and fix 2009 with partial year returns as well. I believe NJ taxation is more favorable to you than PA.

I misread the OP's post, but I got that NO state income taxes were withheld in 2010, in either state.

PA has a flat rate of 3.07%. NJ has graduated rates that can effectively be MUCH higher than 3.07%.

NJ gives a credit against income tax liability for Philadelphia wage tax.
http://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git3w.pdf

OP, did you ever fill out a NJ withholding certificate?