No Phily Tax Refund

From 2002 to 2005, I have worked in Pennsylvania while keeping my residence in New Jersey. Before 2004, my employer had withheld NJ income tax for me and I didn’t need to pay PA income tax (if there was any PA income tax withhold, I could get it back without any problem). For one year from 2004 to 2005, I worked in Philadelphia and when I filled my 2005 tax returns, I asked for a PA tax refund as it showed in my W-2 that there was Philadelphia tax withhold. Sounds OK? Well, not really as I thought.

I got a notice from PA state revenue office last month and in the notice there are two columns of data: one column is the numbers I provided in my PA tax return, including wages, tax withhold amount, and refund amount I requested, and everything looks OK. The other column, the numbers the revenue office provided, has nothing but zeros.

“Why all zeros? Does it mean I didn’t earn any income and didn’t pay any taxes?

With these questions, I called the PA revenue office yesterday and was told that indeed I didn’t have any income with the state and there was no state tax withhold, therefore, no refund. When I was directed to my own W-2 form, I realized for the first time that all my tax withhold was for the city of Philadelphia, not the state. No wonder all those zeros.

I then called the Philadelphia tax office and was told that though I am not a Philadelphia resident, I still have to pay Philadelphia local tax at a lower rate and my employer was right to withhold the tax for me and

NO REFUND!

I was hoping to invest the refund money. Now I guess I have to live with the fact. But, did I include the Phily local tax when I filled my NJ state tax? And how do I know whether or not the proper amount of tax was withheld?