Reciprocal Income Tax Agreements

Reciprocity means an agreement between two or more states, which will exempt from taxation the professional income of workers who work in one state but live in another life. These agreements allow the inhabitants of a state to work across national borders and pay income tax only to their country of residence. Reciprocal agreements usually only cover earned income – salaries, tips and commissions. They generally do not apply to other sources of income such as interest, lottery winnings, capital gains or money that are not earned through employment. 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 exemption from Illinois state income tax. . . .