What Is A State Reciprocity Agreement

Reciprocity is an agreement between two states that allows residents of one state to apply for an exemption from withholding tax in the other (reciprocal) state. Employees can apply for an exemption from New Jersey state income tax by filing Form NJ-165, Certificate of Non-Residence of the Employee in New Jersey. In addition, there are different forms that you need to fill out depending on the state you live in and the state you work in. It can be difficult and tedious not only to find the right shape, but also to make sure that enough is retained not to be punished. It may sound overwhelming, but with the right payroll software, accounting and payroll tax details like this are handled easily and efficiently. At the end of the year, use Form W-2 to tell the employee how much you withheld for state income tax.

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