Employees live out-of-state? Reciprocal tax agreement
If an employee lives in Iowa, Kentucky, Michigan or Wisconsin, but works in Illinois, that employee can file
form IL-W-5-NR to be
exempt from Illinois income taxes and non-resident filing.
As an employer, you may voluntarily collect taxes for that employee's home state. If you want to do this,
obtain a state employer ID number from that state, withhold taxes and remit them to the state. If you do not want to
do this, do not withhold state taxes from that employee. The employee must obtain the forms to pay
quarterly estimated taxes to his/her home state. (Please note that the employee is still an Illinois employee, so you should be
paying Illinois unemployment tax for this employee.)
If you want to voluntarily withhold for other states, click on the state below for forms and information. You will need to select from the drop-down under Employer Requirements Kit.
Iowa
Kentucky
Michigan
Wisconsin
If your employee lives in a state not listed above but works in Illinois, you must withhold Illinois taxes and that employee must complete Illinois non-resident income tax forms.