The schedule SP for tax forgiveness states that we have to file the same information on the SP Form, but that is impossible because he claimed our children and each parent cannot claim the children separately so the only way to have the same info is to file state together. Should I amend his Pennsylvania state return and should we file jointly? We have to file federal separate because of my student loan offset. I am pretty sure that the treasury department doesn't offset pa state returns.

The general rule is that you must file the state return the same way you file federally.

You can file the joint return jointly and submit Form 8379 (Injured Spouse Allocation). That way, you allocate the income between the two of you and the IRS olnly takes the part of the refund that is allocated to your income.

That should resolve your PA tax problem.