Concept: State Tax Reciprocity (USA)
Some states make tax exemption agreements for people who live in 1 state and work in
another. Workday checks both states for reciprocity agreements to calculate state
withholding.
Workday only calculates withholding for states that you've configured using the
Edit Company State and Local US Tax Reporting
task. Be sure to
set up payroll tax reporting information for all states in which employees reside.
Otherwise, Workday calculates standard withholding for the work state only.- Determining Employee Resident State and Work State
- Some states with reciprocity require that workers provide documentation certifying their residency or nonresidency. Record the receipt of these documents using theAdd Worker US Tax Electionstask. Employees can also manually submit residency forms using the self-serviceComplete State and Local Withholding Electionstask.
- Resident state is based on the primary home address.Work state is based on the primary work address or, if that's missing, the business location for the primary or processing position.
- Employees with Multiple Work States
- To define tax allocations for ongoing multiple work states for a worker, use theTax Allocationstab of theAdd Worker US Tax Electionstask.