Illinois Department of Revenue Reciprocal Agreement: What You Need to Know

The Illinois Department of Revenue (IDOR) has established reciprocal agreements with numerous other states to simplify income tax filing for those who live in one state and work in another. This article will provide an overview of what a reciprocal agreement is, how it works, and which states have an agreement with Illinois.

What is a Reciprocal Agreement?

A reciprocal agreement is an arrangement between two or more states that allows individuals who work in one state but live in another to only pay income taxes in their state of residence. This means that the employee is exempt from paying state income tax in the state they work in. The goal of reciprocal agreements is to eliminate double taxation and simplify the tax filing process for employees.

How Does a Reciprocal Agreement Work?

To take advantage of a reciprocal agreement, individuals must fill out a form provided by their employer that indicates their state of residence. This form allows the employer to withhold income tax only in the employee’s state of residence, rather than the state they work in. The employee will still be responsible for paying federal income taxes and any applicable local taxes.

Which States have a Reciprocal Agreement with Illinois?

Illinois has reciprocal agreements with the following states:

– Iowa

– Kentucky

– Michigan

– Wisconsin

If an individual lives in one of these states and works in Illinois, they will only need to pay income tax in their state of residence.

It’s important to note that not all states have reciprocal agreements with each other. For example, if an individual lives in Indiana and works in Illinois, they will still need to pay Illinois income tax in addition to Indiana income tax.

In conclusion, reciprocal agreements are a helpful tool for simplifying income tax filing for those who live in one state and work in another. If you’re an Illinois resident who works in one of the four aforementioned states, be sure to take advantage of your state’s reciprocal agreement to avoid paying state income tax twice.