Reciprocal Tax Agreements and Certificates of Non-Residence

Some states have reciprocal tax agreements with each other that allow employees who live in one state and work in another to be taxed on income in the state where they live, rather than the state where they work. In these cases, employees can provide a Certificate of Non-residency to the state where they work in order to be exempted from paying income taxes in that state.

Zenefits will automatically detect whether an employee can take advantage of a reciprocal agreement based on their home address and assigned work location. However, Zenefits simply notes the reciprocal setup for HR and payroll purposes. Employees will still need to complete a Certificate of Non-residency and submit it to their employer if required. 

  • New employees can opt for reciprocal tax setups when onboarding into Zenefits.
  • If an existing employee changes their address or is assigned a new work location and they now have the option for a reciprocal setup, they'll be able to log in to Zenefits and set it up.
  • Reciprocal agreements apply only to state income withholding. Employees who opt for reciprocal tax setups are still subject to their work state's other employee-paid taxes.
  • Administrators can also mark a state as exempt in the Reciprocal Agreements section located in the employee's tearsheet.

Employees will be taxed in their home state if they do not indicate whether they have a certificate of non-residency on file. If they indicate “Yes”, they will also have tax withheld to their home state. However, if they indicate “No”, taxes will be withheld to the work state, unless they provide a certificate of non-residency to their work location's state.

Agreements and Certificates

In the table below, employees who are assigned a work location in one of the states in the Work State column and a home address in a state listed in the Residence State column in the same row can choose to be taxed in their home states.

In some cases, such as MD or VA, the state withholding exemption form has a field for declaring exemption on the basis of non-residency. Other states, such as IL, have separate forms for declaring non-residency for the purposes of withholding.

Work State Residence State Certificate of Non-residency
D.C. Any state, and Puerto Rico D-4A
Iowa Illinois 44-016
Illinois Iowa, Kentucky, Michigan, Wisconsin IL-W-5-NR
Indiana Kentucky, Michigan, Ohio, Pennsylvania, Wisconsin WH-47
Kentucky Illinois, Indiana, Michigan, Ohio, Virginia, Wisconsin, West Virginia 42A809
Maryland DC, Pennsylvania, Virginia, West Virginia MW 507
Michigan Illinois, Indiana, Kentucky, Minnesota, Ohio, Wisconsin MI-W4
Minnesota Michigan, North Dakota MWR
Montana North Dakota NR-2
New Jersey Pennsylvania IT-4NR
North Dakota Minnesota, Montana NDW-R
Ohio Indiana, Kentucky, Michigan, Pennsylvania, West Virginia NJ-165
Pennsylvania Indiana, Maryland, New Jersey, Ohio, Virginia, West Virginia REV-419
Virginia DC, Kentucky, Maryland, Pennsylvania, West Virginia VA-4
Wisconsin Illinois, Indiana, Kentucky, Michigan W-220
West Virginia Kentucky, Maryland, Ohio, Pennsylvania, Virginia WV /IT-104R

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