Employees live out-of-state? Reciprocal tax agreement

If an employee lives in Illinois but works in Iowa, that employee can file form 44-016 to be exempt from Iowa 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 Iowa employee, so you should be paying Iowa 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.

Illinois

If your employee lives in a state not listed above but works in Iowa, you must withhold Iowa taxes and that employee must complete Iowa non-resident income tax forms.