What Are 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 Nonresident on their tax card to Yes.

To allow the employee to claim nonresident status:

1. Start the Calculation Entries task.

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

3. In Regional, open the employee's state regional component for editing.

4. In State Tax Additional Information, identify the person as a nonresident.

5. 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.