If your employee works in Illinois but lives in one of the mutual states, they can submit Form IL-W-5-NR, Employee`s Statement of Nonresidence in Illinois, for the Illinois State Income Tax Exemption. But even if you`re not covered by a reciprocity agreement, you don`t have to pay taxes to two different jurisdictions. A Supreme Court ruling prevents workers from paying public and local income taxes to two jurisdictions. Nevertheless, a reciprocal agreement for the average worker simplifies the process of clarifying which state owes which taxes. Suppose an employee lives in Pennsylvania but works in Virginia. Pennsylvania and Virginia have mutual agreement. The employee only has to pay public and local taxes for Pennsylvania, not for Virginia. They respect taxes for the employee`s home state. Do you have an employee who lives in one state but works in another? If so, you generally respect public and local taxes for the state of labor.
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