[jfkmetz]

My home is in North Carolina but I work full time for a contracting company in Pennsylvania where I earn all my yearly income. Most of the time, I work from an office in Pittsburgh, and of course live in Pennsylvania while working there. I can work remotely, so I drive to North Carolina and work from there as often as possible.

I just received my W-2 form for 2010 at my Pennsylvania address. I see that my employer deducted Pennsylvania state income tax, but deducted no North Carolina state income tax. There is no indication that my permanent residence is in North Carolina. The address on the W-2 is my Pennsylvania address.

Since I earned no income in North Carolina in 2010, is this correct? Does this mean that I will need to file both North Carolina and Pennsylvania state income tax forms for tax year 2010? If so, do I owe state income tax to both states, or is it split somehow? Did my employer report and deduct my income correctly, or do I need to go back to them and ask them to correct the withholding and W-2 to show both North Carolina and Pennsylvania?

I have never had this situation come up before, so any help is appreciated.

Thanks!

[MLSNC]

If you are a resident of North Carolina you will have to report the income earned in PA on your North Carolina return. You will also have to file a nonresident PA return. On your NC return you will claim a credit for the 2010 tax liability to PA. The credit may or may not equal the full amount of the PA taxes, but can not exceed that tax liability. Claiming the credit keeps you from being taxed twice. Your employer is correct in withholding PA taxes since the work is performed in that state and the employer provides you an office there. I am assuming you work in NC at your convenience and not at the direction of the employer.

[jfkmetz]

Hello MLSNC, and thanks for your answer. My work in NC is at my convenience. To avoid the double tax, how do I know what NC tax credit to claim? Should TurboTax be able to handle the NC tax credit and filing the nonresident PA state tax form?

[MLSNC]

Sorry, can't help you with the software issue. You would think it should be able to though. Someone should be along later that can address that issue. It goes on tax form D-400TC if that is any help.

[jfkmetz]

Did some checking, and appears that all tax software can handle this. TurboTax recommends completing all nonresident state forms before filing the home state to ensure proper calculations. Thanks again, you have been a great help!