The reciprocity agreement applies only to compensation. If you are self-employed or receive other income (for example. B, gains from the sale of real estate) taxable in both states, you must file a non-resident tax return in New Jersey and report the income received. If you are a Pennsylvania resident and New Jersey income tax has been deducted from your salary, you must file a non-resident new Jersey tax return to receive a refund. To stop withholding New Jersey income tax, complete a certificate of non-residence of the employee in New Jersey (Form NJ-165) and give it to your employer. You must attach a signed statement to your non-residents of New Jersey stating that you are a resident of the Commonwealth of Pennsylvania. Similarly, if you are a New Jersey resident and your employer has withheld Pennsylvania income tax on wages, you must file a Pennsylvania tax return to receive a refund. To stop withholding income tax in Pennsylvania, complete Form REV-419EX, Employee Non-Withholding Application Certificate, and give it to your employer. For more information, visit the Pennsylvania Department of Revenue website or call 1-717-787-8201 to increase profits, strengthen existing customer relationships, and attract new customers with our trusted payroll solutions that enable in-house, outsourced, or hybrid models. Reciprocity agreements mean that two states allow their residents to pay taxes only where they live – rather than where they work. For example, this is especially important for high-income earners who live in Pennsylvania and work in New Jersey. Pennsylvania`s highest rate is 3.07 percent, while New Jersey`s highest rate is 8.97 percent.
You cannot claim a credit for taxes paid to Pennsylvania upon your return to New Jersey. If you withheld Pennsylvania income tax from your wages, you must file a Pennsylvania non-resident return to receive a refund. Pennsylvania requires proof that taxes have been paid to the other state. You must print and send the PA return with a copy of the New Jersey state return, the W-2(s) with pa income, and a statement stating that you are a resident of a mutual state. To be exempt from future PA deductions, file Form REV-419 with your employer. New Jersey and Pennsylvania have a mutual agreement. Compensation paid to Pennsylvania residents of New Jersey is not subject to Pennsylvania income tax. Remuneration means salaries, wages, tips, honoraria, commissions, bonuses and other remuneration received for services rendered as employees. Compensation paid to Pennsylvania residents employed in New Jersey is not subject to New Jersey income tax under the terms of the Reciprocal Agreement on Personal Income Tax between the states. Similarly, New Jersey residents are also not subject to Pennsylvania income tax.
Compensation means salaries, wages, tips, honoraria, commissions, bonuses and other payments received for services provided as employees. Access the latest SALT developments as they unfold. These messages are created in the ideal format for optimal social sharing. A revolutionary tool to simplify compliance research for multi-tiered businesses Your W-2`s salaries may differ from the actual taxable income in Philadelphia. To calculate taxable wages, read the NJ`s instructions. This topic can be revisited, but it`s a good idea to keep an eye out for updates. NOTE: The mutual agreement between Pennsylvania and New Jersey will not be extended to Philadelphia. Therefore, income earned in Philadelphia and taxed in both New Jerseys in Philadelphia will be eligible for a credit for taxes paid on the New Jersey return.
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