If you live in Virginia and work in a reciprocal state—or vice versa—you may be eligible to claim an exemption from state income tax withholding in the state where you work. This ensures that your wages are only taxed by your home state, preventing unnecessary dual taxation and simplifying your tax filing process.
Without a valid exemption form, your employer in the work state is legally required to withhold that state’s income tax from your paycheck. However, under reciprocal tax agreements, eligible employees can avoid this withholding and instead pay income tax only to the state where they reside.
This is particularly beneficial for commuters who live in one state and work in another, as it allows them to file taxes in just one state for their wage income.
To claim exemption from withholding, you must complete and submit the correct nonresidency exemption form to your employer in the state where you work. This form informs the employer that you are a legal resident of a reciprocal state and should not have income tax withheld for the work state.
Here are the forms required by Virginia’s reciprocal tax partners:
You should submit this form when:
If you fail to submit the exemption form, your employer may withhold taxes for the work state. In this case, you’ll need to file a nonresident tax return in that state to request a refund and still file a resident return in your home state. This can create additional paperwork and delay your refund.
Filing the correct exemption form promptly ensures proper tax withholding and saves time during tax season. If you qualify under a reciprocity agreement, don’t skip this step.
Simplify cross-border taxes—contact Watter CPA today for help filing reciprocity exemption forms and avoiding dual state taxation.
