Virginia has a reciprocal agreement with District of Columbia, Kentucky, Maryland, Pennsylvania and West Virginia if the only source of income is from wages and salaries.
If your employer withheld tax or you paid tax to these states on your compensation, you must claim a refund from that state. You may not claim a credit on Schedule CR for that tax withheld by the employer. You must file the appropriate forms with that state to receive a refund of tax withheld in error.
The credit for taxes paid to another state is automatically calculated in your account when you add a Nonresident return to your already created Resident Virginia return.
What do I need to do?
If you qualify for the reciprocal agreement, you will need to remove the automatic calculation. Create the Virginia resident return by going to the State Section Resident Virginia Return. You will need to create the nonresident reciprocal state return to claim the refund.
If the other state is Washington DC, go to the
- State Section
- Nonresident DC return
- Enter Myself
- Basic Information
- Enter the state abbreviation for your state of residency
- Click Continue through the state return
To claim exempt from future withholdings, file form D-4A with your employer.
If the other state is Kentucky, go to the
- State Section
- Nonresident Kentucky Return
- Enter Myself
- Basic Information.
- Go to the Residency Information and complete the questions indicting you are a resident of a reciprocal state.
- Complete one form 740-NP-R for the taxpayer and one for the spouse (if applicable)
To claim exempt from Kentucky withholdings in the future, file form 42A809 with your employer.
If the other state is Maryland, go to the
- State Section
- Nonresident Maryland Return
- Enter Myself
- Basic Information
- Complete the questions as they pertain to your resident state
To claim exempt from future Maryland withholdings, complete form MW507 and file it with your employer.
If the other state is Pennsylvania, go to the
- State Section
- Nonresident PA return
- Enter Myself
- Adjustments to Income
- Reciprocal State Wage Adjustment
- Enter the wages as a negative number
Pennsylvania requires proof that taxes were paid to the other state. You must print and mail the PA return along with a copy of the Indiana state return, the W-2(s) with the PA income and a statement explaining you are a resident of a reciprocal state. To claim exempt from future PA withholdings, file form REV-419 with your employer.
If the other state is West Virginia, go to the
- State Section
- Nonresident West Virginia Return
- Enter Myself
- Basic Information.
- Complete the section for Special Nonresident Income for Reciprocal States
To claim exempt from future withholdings, complete form WV/IT-104 and file it with your employer.
NOTE: The nonresident returns will refund some or all of the taxes withheld. You may still be liable for county or city taxes in the state where the income was earned. Check with the state for more information. The resident return will calculate an amount owed (usually).
If the other state is Arizona, California or Oregon, you must claim the credit on the nonresident return of that state instead of on the Virginia return.
Border State Method
You may qualify for a special computation if you are required to file a return with Virginia and only one of the following states: Kentucky, Maryland, North Carolina, or West Virginia. The income from the border state must consist solely of wages and salaries or business income from Federal Schedule C, and your Virginia taxable income must be at least equal to the taxable income shown on the other state's return. We will automatically calculate this special credit when you enter the corresponding 2 letter abbreviation.