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.
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, 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|
|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.