You should submit the IL-W-5NR form, “Employee`s Statement of Nonresidency in Illinois,” to your employer to confirm that you live in one of the four states with reciprocity. If, by chance, you leave your current state and reside in Illinois, you will have to submit the IL-W-5 form, “Certificate of Residence in Illinois,” to your employer. Use our table to find out which states have mutual agreements. And, discover the form that the employee must fill to keep you out of their home state: States of mutual agreement have something that called tax reciprocity between them, alleviating these problems. If you live in Illinois but work in Wisconsin, you are subject to state reciprocity agreements on this issue, so don`t worry about filing two returns. In a reciprocity agreement, two states allow residents to pay taxes only where they live and not where they work. Illinois has a reciprocity agreement not only with Wisconsin, but Illinois` fiscal reciprocity also covers Kentucky, Michigan and Iowa. This means that the same structure would apply if you lived in Wisconsin but worked in Illinois and not the other way around. NOTE: State laws may change and the above information may not reflect the most recent changes. Please check with the tax office of the state in which you work to ensure that there is still a mutual agreement between that state and your country of origin. The information in this article is not designed as tax advice and does not replace the tax advice. Tax reciprocity is a state-to-state agreement that eases the tax burden on workers who travel across national borders to work.
In the Member States of the Tax Administration, staff are not obliged to file several state tax returns. If there is a mutual agreement between the State of origin and the State of Work, the worker is exempt from public and local taxes in his state of employment. Instead of double deduction and taxation, the worker`s Home Member State can credit the amount withheld for his or her state of work. But remember that a worker`s state of residence and work may not calculate the same tax rate on government income tax. Although the states that are not mentioned do not have fiscal reciprocity, many have an agreement in the form of credits. Again, a credit contract means that the worker`s home state grants them a tax credit for the payment of state income tax to their working-age state. If your employee works in Illinois but lives in one of the reciprocal states, he or she can file the IL-W-5-NR Form, Employee`s Statement of Nonresidency in Illinois, for the Illinois State Income Tax Exemption. An Illinois resident who worked in Iowa, Kentucky, Michigan or Wisconsin must submit the IL-1040 form and include all benefits you have received from an employer in those countries. Compensation paid to Illinois residents working in these states is taxable for Illinois. While you were in Illinois, you are covered by a reciprocal agreement between the state and Illinois and you should not be taxed by the other state on your wages.
illinois – usa image by michanolimit from Fotolia.com Employees who work in Indiana but live in one of the following state can be requested to be exempt from Indiana state income tax inholding: Wisconsin`s states with reciprocal tax agreements are: Quite often, residents in one state might work in a neighboring state. To prevent residents from paying taxes in two states, the two neighbouring countries will form a reciprocity agreement. These agreements deal with the income tax of people who work in one state but live in another. As part of reciprocity, residents pay only income taxes on their country of origin, regardless of where they work.