Reciprocal Tax Agreement Georgia: What You Need to Know
The state of Georgia has entered into a Reciprocal Tax Agreement (RTA) with multiple states, meaning that taxpayers who live or work in these states are only required to pay income taxes in their state of residence, rather than in both states. This agreement simplifies tax filings for many employees who work across state lines, but it’s important to understand the details of the RTA to ensure compliance with tax laws.
Currently, Georgia has RTAs with Alabama, Florida, North Carolina, South Carolina, and Tennessee. Under these agreements, residents of these states who work in Georgia are not required to pay Georgia state income tax, and vice versa. This is especially beneficial for employees who live in one of these states but work in Atlanta, which has a high concentration of businesses and employers.
However, it’s important to note that the RTA only applies to wages from employment, not to any other sources of income, such as rental income or self-employment income. Additionally, the RTA does not apply to taxes withheld for Social Security, Medicare, or local taxes. These taxes must still be paid to the state where the work was performed.
To take advantage of the RTA, employees must file a non-resident tax return in the state where they work, even if they are not required to pay taxes in that state. This is necessary to document that the employee is exempt from paying taxes in the state where they work, and to avoid double taxation.
It’s also important to keep track of the number of days worked in each state, as some states have specific rules about how many days an employee can work in another state before being subject to that state’s taxes.
Overall, the Reciprocal Tax Agreement between Georgia and neighboring states provides a simplified tax filing process for many employees who work across state lines. However, it’s important to understand the details of the RTA to ensure compliance with tax laws and avoid any penalties or fines. If you have any questions about how the RTA may apply to your specific situation, it’s best to consult with a tax professional.