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Employees who Live/Reside in one state and Work in another state will reflect both states and applicable taxation. Since Work Location drives Taxation, verify that the employee is assigned to the proper Work Location.

Contact your local agency for rules regarding Reciprocity between states. States can have reciprocity rules related to residents and non-residents. The employee potentially needs to submit work authorization forms to both states when reciprocity applies.

Reciprocity Example: Illinois 

Residents Working Outside the State - Residents of Illinois working in another state can have Illinois income tax withheld, even if the other state withholds income tax from wages earned within that other state unless the other state has a reciprocal agreement within Illinois.

Residents of Iowa, Kentucky, Michigan, or Wisconsin are not subject to Illinois withholding tax even if compensation is earned in Illinois. To be eligible, residents of the participating states must file Form IL-W-5NR, Employee's Statement of Nonresidence of Illinois. (Accurate at the time of publication, always confirm reciprocity as rules change).

Complete both the Resident and Work Income Tax fields for the most accurate employee tax calculation.

(Continue in Local Income Tax)