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Common questions about allocating individual part-year or nonresident Pennsylvania wages

SOLVEDby IntuitLacerte Tax3Updated July 14, 2022

Below are solutions to frequently asked questions about allocating wages for part-year or nonresident Pennsylvania returns in the Individual module of Lacerte.

The taxpayer has income from Pennsylvania that doesn't show on line 1a of the PA-40.  The following diagnostic is generating;

Due to a reciprocal agreement with the state New Jersey, The Pennsylvania return is not required to report income. The return is filed solely for the purpose of claiming a refund of state taxes withheld from Pennsylvania. (ref #949)

New Jersey has a reciprocal agreement with Pennsylvania. If the taxpayer or spouse has Pennsylvania wages, no tax was withheld, and needs to pay Pennsylvania tax, the only solution is to uncheck the full-year resident box for New Jersey on Screen 1, Client Information.

Unlike federal tax returns, Pennsylvania doesn’t allow a 401(k) deduction from wages. Below are steps to include the 401(k) amount in wages on the state return without altering the federal 1040.

Follow these steps to include the 401(k) amount on the state return:

  1. Go to Screen 1, Client Information.
  2. Check the Multi-State Return? box.
  3. Go into Screen 10Wages.
  4. Select the W-2 from the left menu.
  5. Scroll down to the State and Local section.
  6. Press Ctrl+E on your keyboard in (16) State wages, if different.
  7. Enter an Amount that includes the 401(k) deduction.
  8. Select PA for the State column.
    • Leave the Source column blank.

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