Most employees both live and work in the same state. However, some employees work in a neighboring state instead of their home state. In these situations, it can be a challenge to know which taxes apply. Which state taxes is this worker responsible for? How much should be withheld from their payroll?
Certain states experience multi-state scenarios more than others, and so have put reciprocal agreements in place. A reciprocal agreement is also called, and is an agreement between two states that allows residents of one state , to request exemption from tax withholding in the other . This can save people the trouble of having to file multiple state tax returns.
A great example is an employee who is living in Virginia and works in Maryland. These states have a reciprocal agreement. This employee can ask their employer to stop withholding Maryland taxes and to begin collecting Virginia taxes.