We live in PA. My wife works part time in upstate NY. We file a joint federal return and a joint return in PA. TurboTax seems to indicate, and the NY state tax forms seem to indicate, that NY wants me to pay state tax on the full joint income, even though none of my income and some of my wife's income was NOT earned in the state of NY.

It looks like there was some legal action between the states in 1992 on this topic. What is the right answer?

PA and NY do NOT have any reciprocal tax agreement. Hence you have to file a NY state tax non-resident return (IT-203). On that it requires that you report all joint income, but you separate it into two coumns - one for NY state source (your wife's salary) and the other for non NY state source (your salaray, investement income, etc). You report all income to NY in order to set your tax rate, but you pay NY taxes only on your wife's portion of your joint income. Then you complete the PA tax form and take a credit for taxes paid to other jurisdictions (namely NY) on PA Schedule G-S, so you don't pay PA tax on her salary.

Is TurboTax using NY's form IT-203, as it should, and also PA's schedule G-S?