A reciprocal agreement, also called reciprocity, is an agreement between two states that allows residents of one state to request exemption from tax withholding in the other (reciprocal) state. This can save you the trouble of having to file multiple state returns.
For example, let's say you live in Maryland and work in Virginia–two states with a reciprocal agreement. You can ask your employer to stop withholding Virginia taxes. If your employer stops withholding Virginia taxes, you would only have to file a Maryland return.
If your employer has withheld taxes for the work state instead of the resident state, you'll have to file for a refund from your work state. You'll still file your resident return that also includes that income and pay tax on it.
TurboTax handles reciprocal states and will generate the correct state(s) based on your personal information and your W-2.
A state reciprocal agreement can allow you to withhold only for your home state. You must have a form on file with your employer.
State Reciprocal Agreement
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