Note: When setting up Reciprocity agreements with a state that do not have State Withholding or the same type of tax, see DocLink: How do I set up reciprocity between states that do not have the same kinds of state taxes? for directions.

Example of tax reciprocity: An employee lives in Oregon and works in California. The employee's wages are $1,500, the reciprocal tax ID is OR SWH in the amount of $225, and the tax ID is CA SWH in the amount of $150.

• When the reciprocal agreement type is Replace, the OR SWH amount of $225 replaces the CA SWH amount of $150. The OR SWH amount of $225 is deducted from the employee's earnings.
• When the reciprocal agreement type is Balance, the CA SWH amount of $150 is subtracted from the OR SWH amount of $225 to calculate the balance of $75. The CA SWH amount of $150 and an OR SWH amount of $75 are deducted from the employee's earnings.
• When the reciprocal agreement type is Take Both, the OR SWH amount of $225 and the CA SWH amount of $150 are deducted from the employee's earnings.

To set up a tax reciprocity:

1. From Setup, select Taxes, Reciprocity.
2. Select State or Local as the reciprocal agreement tax level.
3. Press Tab.
4. Click List, select the Residence tax group ID, and click OK.
5. Click List, select the Work place tax group ID, and click OK.
6. In the Tax ID column, enter the tax ID for the state or local forfeiting the tax.
   Note: If you are setting up reciprocity for states that do not have the same kinds of state taxes, see DocLink: How do I set up reciprocity between states that do not have the same kinds of state taxes? for steps and considerations .
7. In the Reciprocal Tax ID column, enter the reciprocal tax ID for the tax that needs to calculate instead of the work place tax.
8. In the Agree Type column, select the agreement type. This specifies if you want the reciprocal tax to replace the tax ID, balance the taxes, or take both taxes.
   • Replace: The Reciprocal Tax ID replaces the Tax ID. The tax calculation for the Reciprocal Tax ID occurs instead of the tax calculation for the Tax ID. If Reciprocal Tax ID is blank, no tax calculates for either tax ID.
   • Balance: The amount for the Tax ID calculates and then subtracts from the calculated amount for the Reciprocal Tax ID. Balance reciprocity doesn't affect the amount for the Tax ID.
   • Take Both: The full tax amount for both the Reciprocal Tax ID and the Tax ID calculates. This option is only available when you set up reciprocity agreements between states.
9. Click Accept line for each tax entry.
10. Click Accept table, then Close.

Notes:

• Set up local reciprocity only between a single workplace/nonresident tax from one tax group and a single resident tax from a different tax group. If you try to reciprocate multiple tax IDs from the same tax group to a single tax ID from another tax group, the taxes involved may calculate incorrectly.
• Within a given state, local reciprocity should always be (a) from a workplace/nonresident tax to a residence tax, or (b) from a residence tax to a workplace/nonresident tax. Combining these two methods could result in tax calculation errors.
• If you create a new tax ID to setup reciprocity, add the new tax ID to the appropriate tax group. The reciprocal tax must be in a tax group, in order to calculate.