Employees can apply for the NJ State Income Tax exemption by filing Form NJ-165, Employee`s Certificate of Nonresidence in New Jersey. At the end of the year, use Form W-2 to tell the employee how much you have withheld for state income tax. Reciprocity agreements mean that two states allow their residents to pay taxes only where they live, rather than where they work. This is especially important, for example, for the highest income earners who live in Pennsylvania and work in New Jersey. Pennsylvania`s peak rate is 3.07%, while New Jersey`s peak rate is 8.97%. Do you have an employee who lives in one state but works in another? If so, you generally respect public and local taxes for the state of work. The employee still owes taxes to his home country, which could be a problem for him. Or can he do it? Keywords mutual agreements. Although states that are not listed do not have tax reciprocity, many have an agreement in the form of loans. Here too, a credit agreement means that the worker`s Member State of origin grants him a tax credit for the payment of State income tax to his State of work. The Pennsylvania Department of Revenue announced that New Jersey is termening its reciprocal agreement with Pennsylvania effective January 1, 2017, requiring individuals to file two income tax returns, and withholding employers for both states beginning in 2017. Residents of Pennsylvania and New Jersey receive a credit for income tax paid on wages earned in the other state.

Workers working in Kentucky and living in one of the member states can submit Form 42A809 to ask employers not to withhold income tax in Kentucky. The member states of the agreement have something called fiscal reciprocity between them, which relieves anger. *Ohio and Virginia have conditional agreements. If an employee lives in Virginia, they have to commute daily to their work in Kentucky to qualify. Employees who live in Ohio cannot be shareholders with 20% or more equity in an S company. If your employee works in Illinois but lives in one of the mutual states, they can submit Form IL-W-5-NR, Employee`s Statement of Nonresidence in Illinois, for the Illinois State Income Tax Exemption. The wisconsin states that have mutual tax treaties are workers who are in D.C. should not have to withhold income tax from .C. Why? On .C. has a tax recttivity agreement with each state. If an employee living in one state and working in another works for you, you can automatically start raising taxes for the state of employment.

If you are withholding taxes for the state of work and not for the state of residence, the employee must pay quarterly taxes to his or her home country….