New Jersey Governor Chris Christie gave Pennsylvania and New Jersey commuters who live in one state and work in the other a Thanksgiving present when he announced that he will not terminate the New Jersey-Pennsylvania income tax reciprocity compact.

As we discussed in detail here when Governor Christie announced his plan to terminate the compact, ending the compact would have affected the state tax liability of thousands of commuters and forced them to file tax returns in both states. However, with the announcement that the compact will continue, employers and payroll providers no longer need to plan for the change. Instead, as has been the case for more than 40 years, interstate commuters continue to be required to file a state tax return only in their home state. New Jersey employers who employ Pennsylvania residents can continue to withhold and remit only Pennsylvania income tax from such employees and Pennsylvania employers who employ New Jersey residents can continue to withhold and remit only New Jersey income tax from such employees.

Attorneys in Ballard Spahr's Tax Group advise clients on compliance with federal and state tax filing requirements.

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