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During the 2014 tax year, I moved from Pennsylvania to North Carolina. I kept the same job working for my employer in Pennsylvania as a remote worker.

Despite several requests on my part for my employer to update my tax withholding information for the state of North Carolina, my employer never did so.

Come tax time, my tax advisor had me file taxes as a part-year resident, paying taxes to both North Carolina and Pennsylvania, despite my w2 only showing taxes withheld for Pennsylvania. As a part of the PA tax return, we requested a refund for the time worked remotely, and taxes were paid to North Carolina for this time.

Pennsylvania rejected this request for a refund because of what the employer reported with my w2, despite me sending a copy of my mortgage showing my change in residency, and a copy of my North Carolina tax return showing the taxes paid.

Pennsylvania wants something from my employer backing up my claims, but I've since left that employer, so they are unwilling to do anything for me.

How should I proceed in this matter?

Was the advice of my tax preparer incorrect, and I should've never reported income to North Carolina?

Can I hold my former employer liable in any way, or make them cough up the information that Pennsylvania wants?

Thanks for any advice.

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Your tax advisor was legally correct, but perhaps not very savvy.

Unfortunately, the best way to resolve this sort of situation is to avoid it: You should have insisted your employer stop withholding for PA as soon as you moved out of state. Once someone else has possession of your money the burden is on you to get it back, and the burden can be (practically) quite high before it runs afoul of any serious laws.

The fact is that your filings are correct, and the PA Department of Revenue is being ridiculous. If they can't be satisfied with reasonable and adequate evidence backing your return you can file administrative appeals at little cost in hopes of reaching a more reasonable agent.

However, if I were in this situation, since NC's tax rate is higher, I would just amend my NC return to claim a credit for taxes paid (even though erroneously) to another state. (This takes advantage of our federalist system and your state citizenship and puts the burden on NC to collect the "correct" difference from PA if they care enough. You also don't have to fight for the actual return of money with your new state because presumably you will owe them taxes again this year, and if they haven't returned what you claim you're owed then you just deduct it from what you owe this year.)

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