Symmetry PAYROLL Forms
Payroll Taxes
Payroll Talk
Payroll Goddess
Premiere Payroll Tax Research Library

State Tax Reciprocal Agreements

Compiled by Robert W. Ditmer, CPP*

Almost all states that impose a personal income tax require that the tax be paid on all income earned in the state, including income earned by non-residents. Non-residents generally have to file a non-resident income tax return with the state, and if the state where they live also imposes a personal income tax, then the individual will also have to file an annual tax return for all income earned, regardless of where it was earned. Residents can usually take a credit on the return for their state of residence for taxes paid to other states.

However, in order to relieve taxpayers of this double burden, many states have entered into state tax reciprocal agreements. If two states have a reciprocal agreement and an individual lives in one of those states and works in the other, the individual will only be subject to the income tax in the state where he lives. All states with reciprocal agreements have provisions that exempt an employee from having the tax withheld for the state where he works, but employers are not required to withhold the tax for the state where the employee lives. On the other hand, even though it is not mandatory, a great many employers will establish an account with a reciprocal state and withhold the tax for the employee's state of residence. For instance, in Pennsylvania the form not only declares that the employee is exempt from PA income tax withholding, but it authorizes the employer to withhold the tax for the state where the employee lives.

So almost all states that have state tax reciprocal agreements have a form that an employee can complete that would make his income exempt from withholding of the income tax for the state where the employee works. (The exception is Michigan that does not have a specific form.) The chart below is a list of all states with reciprocal agreements, as well as a link to the state's form for claiming exemption from withholding. All of the forms are in Adobe Acrobat (pdf) format.

This list is accurate as of January 1, 2010, and the links are all active as of that date. If anyone using this chart finds an outdated link, please contact me.

State States with State Tax Reciprocal Agreements Exemption Form
District of Columbia All non-residents who work in DC can claim exemption from withholding for the DC income tax. D-4A
Illinois Iowa, Kentucky, Michigan, Wisconsin IL-W-5-NR
Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin WH-47
Iowa Illinois 44-016
Kentucky Illinois, Indiana, Michigan, Ohio, West Virginia, Wisconsin, Virginia 42A809
Maryland District of Columbia, Pennsylvania, Virginia, West Virginia MW 507
Michigan Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin - Employers may create their own exemption form or use the line on MI-W4 for claiming exemption from withholding. Employee should write "Reciprocal Agreement" and the state name on that line. MI-W4
Minnesota Michigan, North Dakota MWR
Montana North Dakota NR-2
New Jersey Pennsylvania NJ-165
North Dakota Minnesota, Montana NDW-R
Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia IT-4NR
Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia REV-420
Virginia Kentucky, Maryland, District of Columbia, Pennsylvania, West Virginia VA-4
West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia WV/IT-104
Wisconsin Illinois, Indiana, Kentucky, Michigan W-220

Robert W. Ditmer, CPP, is the owner of RWD Financial Support Service, located in Raleigh, North Carolina. Mr. Ditmer provides support and consulting services in the areas of bookkeeping, accounting, payroll and human resources. With over 25 years of experience Mr. Ditmer has worked in a wide variety of industries, and he worked as a Controller in four different businesses including a land planning/landscape architecture firm in Philadelphia, PA, a private dining and catering facility in Wilmington, DE, an IT support company in Glastonbury, CT, and a commercial construction management firm in Columbia, MD. Mr. Ditmer has also spoken at conferences and provided training on various issues, and he has written a number of articles in the field of payroll and payroll taxation. He is a member of the American Institute of Professional Bookkeepers and the American Payroll Association, and qualified as a Certified Payroll Professional in 2000. He can be reached at rwdfinancial@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it . is a free online resource featuring a compilation of research, collaboration and web tools for use by payroll professionals and more including information about payroll tax articles, federal tax information and state tax information.

FYI...  All our calculators are able to address Supplemental withholding rates. Note that Supplemental is an option in the Federal Filing Status field.