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Payroll Reciprocal State Agreements

What is a Reciprocal Agreement?

A reciprocal agreement is an agreement between two states that allows employees that work in one state but live in another to request exemption from tax withholding in their employment state. This means that the employee would not have income tax withheld from their paycheck for their employment state; they would only pay income taxes to the state where they live.

For example: An employee works in Wisconsin but lives in Illinois. The employee can provide their employer with a non-residency certificate so Wisconsin state income tax is not withheld from their paycheck. Due to the reciprocal agreement, the employee would then only have to file an Illinois state tax return.

What is a Non-Residency Certificate?

A Non-Residency Certificate (or statement or declaration), is used to declare that an employee is a resident of a state which has a reciprocal agreement with their work state and therefore chooses to be exempt from withholding income tax in their work state. A non-resident employee qualifying for this exemption must complete and file this declaration with his or her employer as authorization for the employer to stop withholding state income taxes where the employee works. Employers should keep the non-residency certificate on file.

In some states, like Virginia or Maryland, the state withholding allowance certificate (state version of Form W-4) is used to declare this exemption from withholding tax. In other states, like Wisconsin, a separate form is used as the non-residency certificate. Check the table below to view your state’s non-resident certificate.

What States Have Reciprocal Agreements?

Square Payroll is available in the following states with reciprocal agreements:

Employee Work State Employee Residency State Non-Resident Certificate
District of Columbia Any other state Form D-4A
Illinois Iowa (IA), Kentucky (KY), Michigan (MI), Wisconsin (WI) Form IL-W-5-NR
Indiana Kentucky (KY), Michigan (MI), Ohio (OH), Pennsylvania (PA), Wisconsin (WI) Form WH-47
Iowa Illinois (IL) Form 44-016
Kentucky Illinois (IL), Indiana (IN), Michigan (MI), Ohio (OH), Virginia (VA), West Virginia (WV), or Wisconsin (WI) Form 42A809
Maryland District of Columbia (DC), Pennsylvania (PA), Virginia (VA), West Virginia (WV) Form MW 507
Michigan Illinois (IL), Indiana (IN), Kentucky (KY), Minnesota (MN), Ohio (OH), Wisconsin (WI) Form MI-W4
Minnesota Michigan (MI), North Dakota (ND) Form MWR
Montana North Dakota (ND) Form MT-R
New Jersey Pennsylvania (PA) Form NJ-165
North Dakota Minnesota (MN), Montana (MT) Form NDW-R
Ohio Indiana (IN), Kentucky (KY), Michigan (MI), Pennsylvania (PA), or West Virginia (WV) IT-4NR
Pennsylvania Indiana (IN), Maryland (MD), New Jersey (NJ), Ohio (OH), Virginia (VA), West Virginia (WV) Form REV-419
Virginia District of Columbia (DC), Kentucky (KY), Maryland (MD), Pennsylvania (PA), West Virginia (WV) Form VA-4
West Virginia Kentucky (KY), Maryland (MD), Ohio (OH), Pennsylvania (PA), Virginia (VA) Form WV/IT-104
Wisconsin Illinois (IL), Indiana (IN), Kentucky (KY), Michigan (MI) Form W-220