How to file using TurboTax software with Reciprocity Agreements

Forum|Forum|1 year ago
August 28, 2024
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I currently live in PA but work for employers in NJ (one as a W-2 and the other as a 1099-NEC), and the two states have an income tax reciprocity agreement such that I do not have to file or pay income taxes for both states - only one. For my state return, how do I answer the tax filing questions on TurboTax online to reflect this, and for my federal return, how do I answer the questions such that the TurboTax software doesn't double tax my income?

SwapnaM

As a worker in a reciprocal state, you can fill out that state's exemption form(https://www.nj.gov/treasury/taxation/pdf/current/nj165.pdf and give it to your employer if you don't want them to withhold taxes for your work state- NJ. If you do this, make sure your employer also withholds taxes for your resident state- PA, otherwise you may get hit with underpayment penalties come tax time.

If your employer does not withhold NJ taxes, then you need to file only your resident sate PA return.

If your employer has withheld taxes for NJ instead of PA, you'll have to file for a refund from your work state. You'll still file your resident return that also includes that income and pay tax on it.

In TurboTax, always start working on your non-resident state first.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-payments/state-reciprocal-agreement/L3s6VnADT_US_en_US?uid=m0e52207

@JH0412 Thanks for the question.

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JH0412Author

Thank you for the response, and my employers already do not withhold NJ taxes, but my question is also about how to answer the questions that the TurboTax software asks when trying to file those taxes so that the result is accurate (e.g. how to fill out the compensation summary section etc). Please advise, thank you.

SwapnaM

@JH0412 In the federal section, under personal info, you will have to select your resident state PA. For the question," Did you make money in any other states", you would say no. You only need to file PA resident return as there are no NJ withholdings.

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