How do I set employee tax exemption for state reciprocity?

Employees that live and work in states with reciprocity agreements are eligible for resident state income tax (SIT). They're exempt from work SIT.

To configure this:

  1. Open the person's Tax Withholding card for editing.

  2. Open their work state component for editing.

  3. Under State Tax Additional Information, set Nonresident to Yes.