You do not pay taxes twice on the same money, even if you do not live or work in any of the states with reciprocal agreements. You just have to spend a little more time preparing several state returns and you have to wait for a refund for taxes that are unnecessarily withheld from your paychecks. This can significantly simplify the tax time of people who live in one state but work in another state, which is relatively common among people living near national borders. Many states have mutual agreements with others. The map below shows 17 states (including the District of Columbia) where non-resident workers living in different states do not have to pay taxes. Move the cursor over each orange state to see their reciprocity agreements with other states and find out what form non-resident workers must submit to their employers to be exempt from deduction in that state. Some states allow taxpayers to redeem themselves from income tax paid to another state, and some of them have reciprocal agreements. One way or another, the end result is that the labour force is taxed only in the state in which it lives. Illinois` return must be printed, signed and sent to the state. Add a note stating that you reside in a reciprocal state, a copy of the Iowa restitution and copies of your W-2 (s) with income. In the absence of a reciprocity agreement, employers withhold the state income tax for the state in which the worker works. NOTE: State laws may change and the above information may not reflect the most recent changes. Please check with the tax office of the state in which you work to ensure that there is still a mutual agreement between that state and your country of origin.
The information in this article is not designed as tax advice and does not replace the tax advice. It is not uncommon for people to work in a state in a neighbouring state. To prevent residents from paying taxes in two states, the two neighbouring countries will form a reciprocity agreement. These agreements deal with the income tax of people who work in one state but live in another. As part of reciprocity, residents pay only income taxes on their country of origin, regardless of where they work. Reciprocal tax treaties allow residents of one state to work in other states without being deprived of taxes on their wages for that state.