Use our chart to find out which states have mutual agreements. And, find out what form the employee must fill to keep you out of their home state: if an employee lives in a state without mutual agreement with Indiana, he or she can benefit from a tax credit for indiana withheld. At the end of the year, use form W-2 to inform the employee of the amount you have withheld for government income tax. In the absence of a reciprocity agreement, employers withhold the state income tax for the state in which the worker works. 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. Workers are taxed in their country of origin if they do not declare whether they have a certificate of non-residence. If they say “yes,” they will also have tax notices to their country of origin. However, if they declare “no,” taxes are denied to the State of Work, unless they provide a certificate of non-residence in the state of their workplace. The U.S.

Supreme Court ruled against double taxation in Maryland treasury controllers v. Wynne in 2015, which stipulates that two or more states are no longer allowed to tax the same income. But filing multiple tax returns might be necessary to be absolutely certain that you will not be taxed twice. 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. Kentucky has reciprocity with seven states. You can submit the 42A809 exemption form to your employer if you work here but reside in Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia or Wisconsin. However, Virginia residents must commute daily to qualify and Ohions cannot be 20% or more shareholders in a Chapter S company.

When the employee files his tax return, he files a tax return for each state in which you withheld your taxes.