4Enable Pennsylvania and Maryland Reciprocity

There's a reciprocity agreement for the local taxation of Maryland residents working in Pennsylvania.

You can enable an exemption from the Pennsylvania local nonresident tax for Maryland residentsfrom these tax collection districts (TCDs).

County	TCD code
Adams	01
Berks	06
Cumberland	21
Franklin	28
Lancaster	36
York	67

These states' reciprocity agreements address these scenarios.

For this scenario	This is what happens
Employees working in Maryland and living in Pennsylvania	Pennsylvania residents are liable for withholding at the rate in effect for the Maryland county in which they're employed, unless they live in Adams, Franklin, Lancaster, or York counties. Pennsylvania residents aren't subject to Maryland state taxes. For proper withholding, ensure you: Set up the employee's Tax Withholding card in the Residency Certificate section of the tax card. Mark the person as Nonresident for Maryland on the Regional component of their tax card.
Employees living in Maryland and working in Pennsylvania	Maryland residents aren't required to pay Pennsylvania local taxes if they work in Adams or York counties. The payroll process doesn't withhold Pennsylvania local taxes where appropriate, as long as: You have the home political subdivision (PSD) code entered as 880000 on the employee's Pennsylvania Residency Certificate on their tax card. You have the work PSD code that pertains to one of those counties entered on the employee's Pennsylvania Residency Certificate on their tax card. You've marked the person as Nonresident for Pennsylvania on the Regional component of their tax card. If the employees don't work in either of those counties, they're subject to Pennsylvania nonresident local taxation rates.

For this scenario

This is what happens

Employees working in Maryland and living in Pennsylvania

Pennsylvania residents are liable for withholding at the rate in effect for the Maryland county in which they're employed, unless they live in Adams, Franklin, Lancaster, or York counties.

Pennsylvania residents aren't subject to Maryland state taxes.

For proper withholding, ensure you:

Set up the employee's Tax Withholding card in the Residency Certificate section of the tax card.
Mark the person as Nonresident for Maryland on the Regional component of their tax card.

Employees living in Maryland and working in Pennsylvania

Maryland residents aren't required to pay Pennsylvania local taxes if they work in Adams or York counties. The payroll process doesn't withhold Pennsylvania local taxes where appropriate, as long as:

You have the home political subdivision (PSD) code entered as 880000 on the employee's Pennsylvania Residency Certificate on their tax card.
You have the work PSD code that pertains to one of those counties entered on the employee's Pennsylvania Residency Certificate on their tax card.
You've marked the person as Nonresident for Pennsylvania on the Regional component of their tax card.

If the employees don't work in either of those counties, they're subject to Pennsylvania nonresident local taxation rates.