Pennsylvania requires proof that taxes have been paid to the other state. You must print and send the PA return with a copy of the New Jersey state return, the W-2(s) with pa income, and a statement stating that you are a resident of a mutual state. To be exempt from future PA deductions, file Form REV-419 with your employer. The map below shows 17 orange states (including the District of Columbia) where non-resident workers living in reciprocal states do not have to pay taxes. Hover over each orange state to see their reciprocity agreements with other states and to find out which form non-resident workers must submit to their employers to obtain an exemption from withholding tax in that state. Reciprocal tax treaties allow residents of one state to work in other states without deducting the taxes of that state from their wages. You wouldn`t have to file non-resident state tax returns there, as long as they follow all the rules. You can simply provide your employer with a required document if you work in a state that has reciprocity with your home state. This can greatly simplify the tax time for people who live in one state but work in another, which is relatively common among those who live near the state`s borders. Many States have reciprocal agreements with others. You won`t pay taxes twice on the same money, even if you don`t live or work in any of the states that have reciprocal agreements. You just need to spend a little more time preparing multiple state tax returns, and you`ll have to wait for a refund for taxes that have been unnecessarily withheld from your paychecks.

Reciprocity agreements mean that two states allow their residents to pay taxes only where they live – rather than where they work. For example, this is especially important for high-income earners who live in Pennsylvania and work in New Jersey. Pennsylvania`s highest rate is 3.07 percent, while New Jersey`s highest rate is 8.97 percent. NOTE: The mutual agreement between Pennsylvania and New Jersey will not be extended to Philadelphia. Therefore, income earned in Philadelphia and taxed in both New Jerseys in Philadelphia will be eligible for a credit for taxes paid on the New Jersey return. New Jersey and Pennsylvania have a mutual agreement. Compensation paid to Pennsylvania residents of New Jersey is not subject to Pennsylvania income tax. Remuneration means salaries, wages, tips, honoraria, commissions, bonuses and other remuneration received for services rendered as employees. New Jersey has experienced reciprocity with Pennsylvania in the past, but Gov. Chris Christie terminated the agreement effective Jan. 1, 2017. You will need to have filed a non-resident tax return in New Jersey starting in 2017 and have paid taxes there if you work in the state.

Thankfully, Christie backtracked as a cry rose from residents and politicians. Michigan has reciprocal agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin. Submit the MI-W4 exemption form to your employer if you work in Michigan and live in one of these states. Similarly, New Jersey residents are also not subject to Pennsylvania income tax. Compensation means salaries, wages, tips, honoraria, commissions, bonuses and other payments received for services provided as employees. Access the latest SALT developments as they unfold. These messages are created in the ideal format for optimal social sharing. The reciprocity rule applies to employees who must file two or more state tax returns – a resident return in the state where they live and a non-resident tax return in other states where they might work so that they can recover any taxes that have been wrongly withheld. In practice, federal law prohibits two states from taxing the same income. Kentucky has reciprocity with seven states. You can file Exemption Form 42A809 with your employer if you work here but are located in Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin. However, Virginia residents must travel daily to qualify, and Ohio residents cannot be shareholders of 20% or more in an S Chapter company.

This topic can be revisited, but it`s a good idea to keep an eye out for updates. A revolutionary tool to simplify compliance research for multi-level businesses Employees can still file Form NJ-165 with their employer if they live in Pennsylvania and work in New Jersey. . Arizona has reciprocity with a neighboring state – California – as well as Indiana, Oregon and Virginia. Submit the WEC form, the withholding tax exemption certificate, to your employer to obtain a withholding tax exemption. .