In the absence of a reciprocity agreement, employers withhold the state income tax for the state in which the worker works. Reciprocity between states does not apply everywhere. A worker must live in a state and work in a state that has a tax reciprocity agreement. This can significantly simplify the tax time of people who live in one state but work in another state, which is relatively common among people living near national borders. Many states have mutual agreements with others. Employees who work in D.C. but do not live there do not need to have an income tax D.C. Why? D.C. has a tax reciprocity agreement with each state. If an employee lives in a state without a mutual agreement with Indiana, he or she can receive a tax credit for taxes withheld for Indiana.
Reciprocal tax treaties allow residents of one state to work in other states without being deprived of taxes on their wages for that state. They would not need to file non-resident state tax returns there, as long as they follow all the rules. You can simply make a necessary document available to your employer if you work in a state in your home country. Suppose an employee lives in Pennsylvania but works in Virginia. Pennsylvania and Virginia have a mutual agreement. The employee only has to pay government and local taxes for Pennsylvania, not Virginia. They keep taxes for the employee`s home state. Although the states that are not mentioned do not have fiscal reciprocity, many have an agreement in the form of credits. Again, a credit contract means that the worker`s home state grants them a tax credit for the payment of state income tax to their working-age state. Use our chart to find out which states have mutual agreements. And find out what form the employee has to fill to keep you out of their country of origin: even if you`re not covered by a reciprocity agreement, you still don`t have to pay taxes to two different jurisdictions. A Supreme Court ruling prevents workers from paying public and local taxes in two jurisdictions.
Nevertheless, a reciprocal agreement simplifies, for the average worker, the process of sorting the state which owes what tax. The map below shows 17 states (including the District of Columbia) where non-resident workers living in different states do not have to pay taxes. Move the cursor over each orange state to see their reciprocity agreements with other states and find out what form non-resident workers must submit to their employers to be exempt from deduction in that state. Employees who work in Kentucky and live in one of the reciprocal states can submit Form 42A809 to ask employers not to withhold income tax in Kentucky. New Jersey has had reciprocity with Pennsylvania in the past, but Gov. Chris Christie terminated the contract effective January 1, 2017.