How State Reciprocity Affects A Company’s Payroll
Busy with her tax return filing
What is state reciprocity? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Andrew Brown, CEO and Founder of Check, on Quora:
Most employees both live and work in the same state. However, some employees work in a neighboring state instead of their home state. In these situations, it can be a challenge to know which taxes apply. Which state taxes is this worker responsible for? How much should be withheld from their payroll?
Certain states experience multi-state scenarios more than others, and so have put reciprocal agreements in place. A reciprocal agreement is also called reciprocity, and is an agreement between two states that allows residents of one state (their home state), to request exemption from tax withholding in the other (their work state). This can save people the trouble of having to file multiple state tax returns.
A great example is an employee who is living in Virginia and works in Maryland. These states have a reciprocal agreement. This employee can ask their employer to stop withholding Maryland taxes and to begin collecting Virginia taxes.
Currently, there are 16 states (plus D.C.) that have some sort of reciprocal agreement: Arizona, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, New Jersey, North Dakota, Ohio, Pennsylvania, Virginia, Washington DC, West Virginia, and Wisconsin.
This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Source: www.forbes.com
