Drake Tax - PA: Reciprocal Compensation Agreement

Reciprocal Compensation Agreement

Pennsylvania has agreements with Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia. Generally, under these agreements, one state will not tax a resident of the other state on compensation that is subject to employer withholding. In Drake Tax, the PA return will show all zeros except for the withholding and the refund amount when the taxpayer is a resident of a state listed above.

Starting in tax year 2020, the PA W2RWK no longer generates automatically for residents of these states that have Pennsylvania source W2 income. Instead, this income simply won’t be reported on line 1 of the PA40.

To force PA W2K to print, go to PA > General tab > W2WK screen and enter the corresponding number in the W2 Number box located in the top left corner (for example, for the first W2 screen entered on the federal data entry screens, use a “1” on the PA W2WK screen). Page Down as needed to produce/edit the worksheet for additional W2 screens.