State Reciprocity Agreements

Some states have reciprocity agreements where the employee can claim nonresident status in those states. This allows the employee to have their resident state tax withheld instead of their work state tax.

To accomplish this, you must set the Nonresident field on their tax card to Yes. Otherwise, Vertex can't correctly calculate the reciprocity. For further info, see the Vertex Payroll Tax Calculation Guide for the United States.

To allow the employee to claim nonresident status:

1. From My Client Groups, click Payroll.

2. Click Calculation Cards.

3. Search for the person, and open their tax card for editing.

4. In Withholding Details, click the employee's work state node.

5. Click Edit and select either Update or Correct.

6. In State Tax Additional Information, for Nonresident, select Yes.

7. Click Save and Close.

For example, Illinois and Kentucky have a reciprocity agreement. An employee living in Illinois and working in Kentucky would only have to pay Illinois state income tax (SIT). On this employee's tax card, for their work state node (KY), you identify them as a nonresident, excluding them from KY SIT calculations.

Pennsylvania and Maryland Reciprocity

There's a reciprocity agreement for local taxation of Maryland residents working in Pennsylvania. For further info, see Pennsylvania Local Earned Income Tax in the Help Center.