The Pennsylvania Department of Revenue (PDOR) is preparing for the end of income tax reciprocity with New Jersey. Though the state of New Jersey has not yet issued guidance, the end of the agreement is expected to become effective January 1, 2017.
Pennsylvania Issues Guidance
New Jersey Governor Chris Christie announced the state would terminate the income tax reciprocity agreement due to budget issues. The end of reciprocity affects Pennsylvania residents working in New Jersey and New Jersey residents working in Pennsylvania. Beginning January 1, 2017, these employees should know that:
- They may owe income tax to both Pennsylvania and New Jersey
- If their employer doesn’t withhold tax for the resident state, the employee may need to make estimated quarterly payments to that state
- Affected employees will be required to file an income tax return with both states beginning in 2018
The PDOR has posted an informational flier for employers to give employees to explain the end of reciprocity with New Jersey, along with a Q&A for employers and employees.
Stay tuned to Pay News Now for any further guidance provided by New Jersey and Pennsylvania on this issue.
Update: On November 22, 2016, New Jersey Governor Chris Christie announced a reversal of his decision to end the reciprocity agreement between New Jersey and Pennsylvania. According to his press release, the reciprocity agreement, which was set to end on January 1, 2017, will remain in place. For more details, see the governor’s website.