Reciprocal agreements

Reciprocal agreements between states allow employees that work in one state but live in another to only pay income taxes to their state of residency. If reciprocity exists between the two states, employees will need to complete and deliver a non-residency certificate to you in order to have residency state tax withheld instead of the work state tax.

If you'd like to set up reciprocity for your employees with Gusto, see this article.

Note: 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, please reach out to an accountant or the applicable state agency for determination of liability.

States with Reciprocal Agreements

The below states have reciprocal agreements.

Resident State Work State Non-resident Certificate 
States outside of District of Columbia District of Columbia  D-4A
California, Indiana, Oregon, Virginia Arizona WEC
Iowa, Kentucky, Michigan, Wisconsin Illinois IL-W-5-NR 
Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin  Indiana  WH-47 
Illinois  Iowa  44-016 
Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, Wisconsin Kentucky  42A809 
District of Columbia, Pennsylvania, Virginia, West Virginia  Maryland  MW 507 
Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin  Michigan  MI-W4 
Michigan, North Dakota  Minnesota  MWR 
North Dakota Montana  MT-R 
Pennsylvania  New Jersey  NJ-165 
Minnesota, Montana  North Dakota  NDW-R 
Indiana, Kentucky, Michigan, Pennsylvania, West Virginia  Ohio  IT-4NR 
Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia  Pennsylvania  REV-419
District of Columbia, Kentucky, Maryland, Pennsylvania, West Virginia  Virginia  VA-4 
Kentucky, Maryland, Ohio, Pennsylvania, Virginia  West Virginia  WV/IT-104 R 
Illinois, Indiana, Kentucky, Michigan  Wisconsin  W-220  

Note: NY and NJ do not have reciprocity. If you work in NY and live in NJ, you will need to pay NY income taxes as a non-resident and pay NJ income taxes as a resident. However, NJ residents can take a tax credit for taxes that have been paid to other jurisdictions.

 

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