Question

State payroll tax withholding

Forum|Forum|1 year ago
May 29, 2024
1 reply
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Employee works in Kentucky, lives in Illinois a reciprocal state.

How do you enter this in their payroll tax withholdings ?

Multiple States

if they filed form Kentucky 42A809 with their employer, only Illinois withholding should have been taken.

the IL-941 should be filed to reflect the Illinois wages and withholding. on their w-2 the state portion wouls only show Illinois amounts.

if they didn't then likely they would have to be treated as a Kentucky resident for withholding purposes.

Hal_Al

IL has a reciprocal agreement, on wages, with KY. No KY state taxes are withheld or due and you do not need to file a KY return.

However the reciprocity agreement does not apply to local city or county income taxes. You are not required to file a local return, but you are also not entitled to a refund of the city or county withholding (box19 on your W-2), unless there was an error in the amount. IL will give you a credit for any local KY tax paid/withheld.