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If you live in Pennsylvania and work in New Jersey, your income is taxed by Pennsylvania and is not subject to tax by New Jersey. If taxes are improperly withheld by an employer in New Jersey, a taxpayer can apply for a refund.erbert M. Paul, a New York tax lawyer, explained how New York handles the matter. If you have a residence in New York and in another state as well, and spend more than 183 days in New York, he said, you are considered a statutory resident and all of your income is subject to New York tax..
1 Claiming the entire amount of tax paid in another state. 2  The credit only applies to tax on the part of your income taxed by both states. 3  The other state tax is the net tax after subtracting any credits allowed by the other state.he credit only applies to the portion of the actual tax paid to the other state on the income taxed by both states. Examples 2 and 3 below will help you decide if you qualify for the credit and how to prorate the tax.