If the state in which you work does not have a mutual agreement with your country of origin, you must file a resident tax return and a non-resident tax return. Note: Even if you live and work in states that have mutual agreement, mutual agreement only applies to income from work. If you receive income without employment in your working state, you must also file a non-resident tax return, although there is a mutual agreement. (see below) They should also contact a qualified accountant or tax specialist for additional guidance on state-specific tax issues. 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. Use our chart to find out which states have mutual agreements. And, discover the form that employees must fill to keep you out of their country of origin: reciprocal agreements between states allow workers who work in one state but live in another to pay only income taxes to their state of residence. If reciprocity exists between the two states, staff must complete a certificate of non-residence and give it to you so that the tax on the place of residence can be withheld in place of the workplace tax. 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. New Jersey has had reciprocity with Pennsylvania in the past, but Gov. Chris Christie terminated the contract effective January 1, 2017. You should have filed a non-resident return to New Jersey from 2017 and paid taxes there if you work in the state.
Fortunately, Christie reversed course when a hue and a cry from residents and politicians were edited. Do you have an employee who lives in one state but works in another? If it is the presence, you usually keep government and local taxes for the state of work. The worker still owes taxes to his country of origin, which could cause him trouble. Or can he? Mutual agreements. In the absence of a reciprocity agreement, employers withhold the state income tax for the state in which the worker works. 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. Reciprocity agreements mean that two states allow their residents to pay taxes only where they live, not where they work. This is particularly important, for example, for people with higher incomes who live in Pennsylvania and work in New Jersey.