Employees in the state of West Virginia who live in another state get a special pass come tax time as long as they are covered by a special agreement between the states known as a reciprocal tax agreement. West Virginia holds reciprocal tax agreements with resident of Kentucky, Maryland, Ohio, Pennsylvania and Virginia.
Residents of these states who work in West Virginia don’t have to pay income tax in their work state on their earnings. In order to take advantage of the reciprocal tax agreement, employees should file Form WV/IT-104R with their West Virginian employer. After doing so, the taxpayer is only responsible to file one tax return in their home state.
Under these agreements workers only have to pay income tax to the state in which they live. However, reciprocal agreements only cover employment income. Any unearned income originating in West Virginia is subject to taxation. These sources of income can include:
- Interest income
- Capital gains
- Lottery winnings
- Income from consulting work
- Income from Independent Services performed in the state
In these circumstances, a taxpayer will need to file a tax return in their home state and in West Virginia. The need to file two returns even when a reciprocal agreement exists may occur if the employer mistakenly withholds income tax. You’ll need to file a return to request a refund.
If you only have earned wages, including tips and commissions in West Virginia, and you’re a resident of one of the states covered under the reciprocal agreement, then you’ll only need to file a return in your home state come tax time.
