Virginia Reciprocal Tax Agreement

Wednesday, April 14th, 2021

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. 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. Tax reciprocity is a state-to-state agreement that eases the tax burden on workers who travel across national borders to work. In the Member States of the Tax Administration, staff are not obliged to file several state tax returns. If there is a mutual agreement between the State of origin and the State of Work, the worker is exempt from public and local taxes in his state of employment. Employees residing in one of the reciprocal states can submit Form WH-47, Certificate Residence, to apply for an exemption from Indiana State income tax. You do not pay taxes twice on the same money, even if you do not live or work in any of the states with reciprocal agreements. You just have to spend a little more time preparing several state returns and you have to wait for a refund for taxes that are unnecessarily withheld from your paychecks. 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. 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. Pennsylvania`s top tax rate is 3.07%, while New Jersey`s maximum tax rate is 8.97%. Michigan has mutual agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin. Submit the MI-W4 leave form to your employer if you work in Michigan and live in one of these states. This can significantly simplify the tax time of people living in one state but working in another state, which is relatively common for people living near national borders. Many states have mutual agreements with others. 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. 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.