Overview to Reciprocal Tax Agreements – Paid

What is a reciprocal tax agreement?

Reciprocal tax agreements between two states allow residents of one state to work in another state without having income taxes withheld or reported in the state they work in. The income they earn in their work state is taxed and reported based on the tax rules of their state of residence.

Which states have reciprocal agreements?

In the table below, find the work state and the resident states that have reciprocal agreements in place.

What is a state reciprocity tax form?

In the table below you will also see the "Forms Required" column. For workers working in a state that has a reciprocal agreement with their home state, they can file an exemption by completing the linked required form and providing it to their employer. From there, the employer is required to keep the exemption form on file indefinitely, or until the employment settings for the worker have changed.

WORK STATE	RECIPROCAL AGREEMENT RESIDENT STATES	FORMS REQUIRED
Arizona	California, Indiana, Oregon, Virginia	Form WEC Withholding Exemption Certificate
District of Columbia	All nonresidents who work in the district can claim exemption from withholding for the District of Columbia 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 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
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
Montana	North Dakota	Form MW-4 Montana Employee’s Withholding Allowance and Exemption Certificate
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 Statement of Residency
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 Employee's Virginia Income Tax Withholding Exemption Certificate
West Virginia	Kentucky, Maryland, Ohio, Pennsylvania, Virginia	Form WV/IT-104 West Virginia Employee Withholding Exemption Certificate
Wisconsin	Illinois, Indiana, Kentucky, Michigan	Form W-220 Nonresident Employee's Withholding Reciprocity Declaration

What if the worker's home/work states do not have a reciprocal agreement?

Federal law prohibits multiple states from taxing the same income. So, if a worker's home and work states do not have a reciprocal tax agreement, the worker will withhold and pay taxes based on their work state. At annual tax time, workers will file their taxes based on both their home and work state rules, but all work state taxes will be re-applied to their home state taxes as needed. This ensures their wages are not taxed in multiple states.

Remember:

If a worker lives and works in two states that have a reciprocal agreement in place:

We will withhold SIT for the home state only
All other taxes will be withheld for the work state (ie; SUI)

If a worker lives and works in two states that do not have a reciprocal agreement in place:

We will withhold all taxes based on the work state only