Hi,
My question is if I live in NJ, work for a Pennsylvania employer, but actually work in NY,
What taxes should be deducted from my paycheck?

You will pay taxes to NY for sure. You will file tax returns for NY and NJ, but NJ will give you a credit for the taxes paid to NY state.

Since NY state tax rates are higher than NJ, the result is that the credit NJ gives for the NY state taxes paid completely offsets your NJ state tax liability.

But you STILL need to file the NJ return to keep the record straight.

If, by mistake, your employer is withholding Pennsylvania taxes, a PA return will be required to claim a refund of those withheld taxes.

NY: If you are present in a state, then any income earned during this period, must be reported to the state.

NJ: To your resident state, you must report your worldwide income for the year.

PA: If you live and work is a state but your employer is from another state, then your income is only subject to the state where you live and work. Read: Your U.S. Tax Return: Working or Living in Two or More states (http://taxipay.blogspot.com/2008/06/working-in-two-or-more-states.html)