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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10146
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I live in Delaware but my taxed were completed and I had to

Customer Question

I live in Delaware but my taxed were completed and I had to pay Delaware and my tax professional e filed for me to pay Pennsylvania and I owe them. Now my job takes out taxes for the city of Philadelphia and I pay the state of delaware since I live here. but his answer was that since there is no agreement between Delaware and pa I have to satisify pa state taxes. Now I checked with co workers and they don't even FILE pa and they are like me living in Delaware and working in philly right here in my office. It just does not seem right that I have to pay taxes in both states. I know there is no agreement between pa and de but you would think that if de residents who work in pa have to pay pa taxes it would be common knowledge. my payroll coordinator said I had to make a choice she cant take out pa state and de state so I had her take out de state but the city of philly takes there money out also every two weeks so if I have to pay pa state tax also you would think pa would be doing this also. And especially since I work for the federal government right here in center city philly. I want to do the right thing but I am not trying to OVERPAY my taxes.
JA: Thanks. Can you give me any more details about your issue?
Customer: I have been advised I have to pay state taxes for Delaware and Pennsylvania I am unsure why I have to pay both and it appears most Delaware residents I am co workers with only file DE. We all pay city of philly non resident tax but no state of PA tax comes out and it appears since there is no agreement between between the two states and there Delaware residents must pay the PA state with holding tax at the end of each year.
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Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security & Medicare, estate, corporate & tax advice since 1986

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Hi, I can help here.

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The way this works when you don't have that automatic withholding adjustment for reciprocal states, is that your resident state always taxes all income (no matter where it's earned .. the idea is that you are resident, and you use more of the state's services).

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And if you have income generated in a DIFFERENT state (which is not your resident state) that state will tax you on THAT income ( this can come from working across a state line, having rental property and income from that state, etc.).

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However, your resident state gives you a credit for any tax paid to that non-resident state .

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This way you are not taxed twice on the same income

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You take the credit on line 10 of the Delaware return (form 200-01) for taxes imposed by other states. You must attach a signed copy of your PA return in order to take this credit.

Expert:  Lane replied 9 months ago.

The net effect of this is that you will be taxed at the higher state's tax rate

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(If the PA tax is higher on that income, DE can only credit what it's total tax would have been)

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(If the DE tax is higher then you'll end up paying at THAT rate and get a full credit for everything paid to PA)

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Remember that withholding, and what you end up paying when you file these two returns, (Delaware resident return and PA non-resident return) are two different issues ... you may very well get a refund from either state ... depending on what you've had withheld, vs. what the actual liability ends up being.

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But in the end, you won't be taxed twice, because of that credit.

Expert:  Lane replied 9 months ago.

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I hope this has helped.

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Please let me know if you have any questions at all.

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If this HAS helped, I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)

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That's the only way I'll be credited for the work here.

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Thank you!

Lane

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Expert:  Lane replied 9 months ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

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Let me know…

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Thanks

Lane

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