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Some states have reciprocity agreements. A reciprocity agreement between states means that the employee only pays taxes in one of the states — the state where the employee lives.

  • For the employee's residence state, enter the appropriate filing status and allowances from the employee's W-4.
  • For the work-location state, click the Filing status drop-down arrow, and select Do Not Withhold. (If you don't see the work-location state, don't worry. We'll make sure no taxes are withheld).

See which states have reciprocity agreements

Business Location Employee Residence State
Arizona California, Indiana, Oregon, Virginia
Arkansas  Texarkana, Texas and Texarkana, Arkansas
Illinois  Iowa, Kentucky, Michigan, Wisconsin
Indiana  Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin
Iowa Illinois
Kentucky Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, Wisconsin
Maryland District of Columbia, Pennsylvania, Virginia, West Virginia
Michigan Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin
Minnesota  Michigan, North Dakota
Montana  North Dakota
New Jersey  Pennsylvania
North Dakota Minnesota, Montana
Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia
Pennsylvania Indiana, Ohio, Maryland, New Jersey, West Virginia
Virginia District of Columbia, Kentucky, Maryland, Pennsylvania, West Virginia
West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia
Wisconsin Illinois, Indiana, Kentucky, Michigan

If your employee does not give you a certificate of non-residence, the reciprocity agreement does not apply. That means your payroll taxes are calculated as though there were no reciprocity agreement between your work state and your employee's residence state.