Need help on PA local return

[schirallicpa]

I have not come across this before.  I live near the PA border in NY and have a few PA returns every year.  In this case, the person resides in PA and works in NY.  There is no PA withholding, only NY withholding on his W2.  I prepare a local return for him, which is 1 % tax. However, on the local return, there is a credit available for taxes paid to other states.  I have never paid attention to this line before.  When I do the calcs, it basically eliminates the local tax.  Is this correct?  I guess I thought if you lived in PA you paid local, cut and dry, and that's that.

Generally, I have people working in PA, living in NY and they have the PA local tax withheld and we file the local return showing the 1 percent tax, and the 1 percent withholding, and nothing due.  But NY'rs get that back as a credit on their return.

So now I am wondering if I have missed this local tax credit and how many PA people should have gotten it.  

[jklcpa]

Yes, absolutely!  I have a few like that and it is very possible that the entire local tax is eliminated. There is an interplay with the state credit that comes first though, or should I say that is the method the local jurisdictions' calcs work in the locals I prepare.  If you notice, that is why the income taxed in both states is multiplied by the PA rate and subtracted from the nonres state tax. In that way, only the excess is available for the credit on the local return. 

[schirallicpa]

ahhhhh - so I found another person with the same situation, and in their case they did not get the credit because of other PA income.  but it makes sense.  thank you for the heads up.