When two taxes are reciprocal, the controlling tax agencies have agreed on a method of either crediting or not crediting tax from one to the other. In the system, these reciprocal agreements are defined through Tax Codes and Employee Tax Details.
For taxes subject to reciprocation, select the appropriate Tax Reciprocation rule. This is often called tax reciprocity.
Tax Reciprocation Rules
|
Rule |
Code |
Description |
|
1 |
Reciprocation Rule 1. Tax when no work state taxes |
If Work State Tax = 0, then Resident State Tax withheld. Where no work state tax is withheld, the system withholds
resident state tax. If Work State Tax = Amount, then zero Resident State Tax withheld. Where work state tax is withheld, the system withholds zero tax for the resident state tax. |
|
2 |
Reciprocation Rule 2. Tax all wages worked |
Tax all wages worked whether resident or non-resident. The system defaults to processing taxes according to Code 2, unless defined otherwise. |
|
3 |
Reciprocation Code 3.
|
Work State Tax – Resident State Tax Withholding = Adjusted Work State Tax Amount. Reduce the work state tax by the resident state tax withholding. |
|
4 |
Reciprocation Rule 4. Tax when no work locality tax |
If Work Locality Tax = 0, then Resident Locality Tax withheld. Where no work locality tax withheld, the system will withhold resident locality tax. |
|
5 |
Reciprocation Rule 5. Credit tax pd to wrk locality |
Credit this tax paid to the work tax locality. |
|
6 |
Reciprocation Rule 6. Tax Resident Only |
Only tax resident. For instance, where one employee works in MN and lives in WI. |
|
7 |
Reciprocation Rule 7. PA Local Act 32 |
Rule 7 is used for Pennsylvania (PA) Act 32 local taxation |