Reciprocal agreements and courtesy withholding

Federal law prohibits two states from taxing the same income—for employees who live and work in different states, and file more than one state tax return, reciprocal agreements exist so that they only pay income taxes to one state (usually their home state of residency) on the same wages.

Several states have reciprocal agreements with other states, so employees who work and live in those different states don’t have to have taxes withheld in more than one of them. Reciprocal agreements usually state that:

If reciprocity exists between the two states, employees will need to complete and deliver a non-residency certificate to you to have the residency state tax withheld instead of the work state tax.

Important reminder—unemployment registration may not be necessary in an employee’s home state

While reciprocity is determined by an employee's home address and pertains to their income tax withheld, unemployment liability is typically determined by an employee's work address.  Before registering for unemployment tax in a new state, reach out to an accountant or the applicable state agency for determination of liability.