H.R. Questions: How to I handle state and local income tax when employees live in one state but work in another?

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For states with reciprocity agreements, workers only pay taxes in the state where they live, not the state where they perform the work. As an example, a person who lives in VA but works in West VA would not have to pay state taxes in West VA, because the two states have a tax reciprocity agreement. This goes for local taxes also.


If the two states do not have reciprocity, tax must be paid to both states but a credit for tax paid to the non-resident state is usually available from the state of residence at tax time.


Here is a list of states with reciprocity agreements from https://www.taxact.com


State States in Agreement Certificate/Form to Use
Arizona California, Indiana, Oregon, Virginia Form WEC Withholding Exemption Certificate
District of Columbia All nonresidents who work in DC can claim exemption from withholding for the DC income tax. Form D-4A Certificate of Nonresidence in the District of Columbia
Illinois Iowa, Kentucky, Michigan, Wisconsin Form IL-W-5-NR Employee’s Statement of Nonresidence in Illinois
Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin Form WH-47 Certificate of Residence
Iowa Illinois Form 44-016 Employee’s Statement of Nonresidence in Iowa
Kentucky Illinois, Indiana, Michigan, Ohio, West Virginia, Wisconsin, Virginia Form 42A809 Certificate of Nonresidence
Maryland District of Columbia, Pennsylvania, Virginia, West Virginia Form MW 507 Employee’s Maryland Withholding Exemption Certificate
Michigan Wisconsin, Indiana, Kentucky, Illinois, Ohio, Minnesota Form MI-W4 Employee’s Michigan Withholding Exemption Certificate
Minnesota Michigan, North Dakota Form MWR Reciprocity Exemption/Affidavit of Residency for Tax Year 2020
Montana North Dakota Form NR-2 Employee Certificate of North Dakota Residence
New Jersey Pennsylvania Form NJ-165 Employee’s Certificate of Nonresidence in New Jersey
North Dakota Minnesota, Montana Form NDW-R Reciprocity exemption from withholding for qualifying Minnesota and Montana residents working in North Dakota
Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia Form IT-4NR Employee’s Statement of Residency in a Reciprocity State
Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia Form REV-419 Employee’s Nonwithholding Application Certificate
Virginia Kentucky, Maryland, District of Columbia, Pennsylvania, West Virginia Form VA-4 Personal Exemption Worksheet
West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia Form WV/IT-104 Employee’s Withholding Exemption Certificate
Wisconsin Illinois, Indiana, Kentucky, Michigan Form W-220 Nonresident Employee’s Withholding Reciprocity Declaration

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


Be Audit-Secure™!


Lisa Smith, SPHR, SCP

EEOC Certified Investigator


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Lisa Smith, SPHR, SHRM – SCP
Certified EEO Investigator (EEOC)
Lead Support and Content Chief – HelpDeskforHR.com
“You cannot be audit-proof, but you can Be Audit-Secure.”

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