After long struggles, the agreement will be maintained. We understand that some people question the real motivations for deciding to do nothing with the tax treaty and then ultimately maintain it, but our role is not to participate in a political debate. Our mission is to present information so that you can make the best possible decisions. New Jersey and Pennsylvania have a mutual agreement. Benefits paid to New Jersey residents employed in Pennsylvania are not subject to Pennsylvania income tax. Remuneration means salaries, wages, tips, fees, commissions, bonuses and other remuneration received for services as employees. Unfortunately, there is no doubt that some employers and payroll companies have wasted time and resources preparing for the policy change. There is no doubt that the change would have generated additional revenue for New Jersey, but would have had a negative impact on many businesses and commuters between states. But the agreement will be maintained for the foreseeable future. Pennsylvania requires proof that taxes have been paid to the other state.
You must print and send the AP return with a copy of the New Jersey State Restitution, the W-2(s) with the AP income, and a statement clarifying that you are established in a mutual state. To be exempt from future AP deductions, submit Form REV-419 to your employer. The Pennsylvania Department of Revenue announced that New Jersey is termening its reciprocal agreement with Pennsylvania effective January 1, 2017, requiring individuals to file two income tax returns, and withholding employers for both states beginning in 2017. Residents of Pennsylvania and New Jersey receive a credit for income tax paid on wages earned in the other state. Pennsylvania and New Jersey end reciprocity agreements, withholding for two states starting in 2017 It`s particularly advantageous for Pennsylvanias who pay a flat income tax rate of 3.07 percent, compared to New Jersey`s progressive tax, which is between 1.4 and 8.97 percent for those earning more than $500,000. New Jersey residents who fall into the lowest income tax category and work in Pennsylvania also pay less public taxes.