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Pennsylvania residents who receive compensation from New Jersey sources are not subject to New Jersey income tax on those earnings. Under the State of New Jersey and the Commonwealth of Pennsylvania Reciprocal Personal Income Tax Agreement, a New Jersey employer is not required to withhold New Jersey income tax from compensation paid to its Pennsylvania resident employees who file form NJ-165, Employee's Certificate of Nonresidence in New Jersey, with their employer.
This agreement covers compensation only. Compensation means salaries, wages, tips, fees, commissions, bonuses, and other remuneration received for services rendered as an employee. Pennsylvania residents who are self-employed or who receive other types of income from sources within New Jersey must file a New Jersey nonresident return and report the income received.
If you are a Pennsylvania resident and your employer withheld New Jersey income tax from your wages, you must file a New Jersey nonresident return to obtain a refund. To stop the withholding of New Jersey income tax, complete an Employee's Certificate of Nonresidence in New Jersey (Form NJ-165) and give it to your employer. When filing for a refund, Pennsylvania residents must enclose a signed statement with their New Jersey nonresident income tax returns declaring that they are residents of the Commonwealth of Pennsylvania. Order an Employee's Certificate of Nonresident in New Jersey, Form NJ-165; New Jersey Nonresident Return, and instruction booklet, or get the tax forms. from the NJ Department of the Treasury. Therefore, while the employer should have told you to file the Form NJ-165, so to avoid the deductions, the good news is you can get a refund of that money.
As far as unemployment, if you work in one state and live in another, you must file your claim for unemployment benefits with the state where you worked, so you would file in NJ. As such you would be subject to their rules and claim limits in terms of unemployment. To be eligible for unemployment benefits, you must have worked at least 20 base weeks in covered employment or you must have earned $8,400. For claims filed in 2016, the minimum base week amount is $168. These wages must have been earned during a 52 week period that is called a base year.
Base year calculations are a bit involved, but you can read all of the above and an explanation to determine whether you earned enough at the NJ Department of Labor and Workforce Development website (you can also file a claim on that website).
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