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. The reverse holds true for Pennsylvania employers with New Jersey resident employees.
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. An example of other income is gain from the sale of property located in New Jersey, which is taxable in both states.
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 go to our online tax forms.
Likewise, if you are a New Jersey resident and your employer withheld Pennsylvania income tax from wages you earned there, you must file a Pennsylvania return to obtain a refund. To stop the withholding of Pennsylvania income tax, New Jersey residents who receive compensation from Pennsylvania must complete Form REV-419, Employee’s Nonwithholding Application Certificate, and give it to their employer. More information is available on the Pennsylvania Department of Revenue website or by calling 1-717-787-8201.