Determination engine

Which state do you actually withhold in?

Reciprocity, convenience-of-the-employer, nonresident thresholds and unemployment localization, applied together to one employee's facts. Every answer cites the state source it came from.

Withhold Michigan income tax.

Illinois and Michigan have a reciprocal agreement, so the work state stands down once the exemption certificate is on file.

Income tax withheld to

Michigan

Flat 4.25%

Employee certificate

IL-W-5-NR

Employee's Statement of Nonresidence in Illinois

Unemployment insurance

Illinois

Localized under factor 1: Localization.

Reciprocal agreement

Yes

Illinois exempts Michigan residents.

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File IL-W-5-NR with the employer

Reciprocity is not automatic. Until the employee files IL-W-5-NR (Employee's Statement of Nonresidence in Illinois) you are legally required to withhold Illinois tax. Keep the signed form on file; it is not sent to the state.

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Withhold Michigan income tax instead

Under the agreement the employee is taxed only by their state of residence. You will need a Michigan withholding account.

Michigan has local income taxes at the residence

24 Michigan cities levy a municipal income tax (Detroit at 2.4% resident / 1.2% nonresident; most others 1% resident / 0.5% nonresident). Employers in those cities must withhold city tax separately. Michigan's state reciprocity agreements do NOT exempt an employee from Michigan CITY income tax on work physically performed in the city -- Detroit in particular taxes nonresidents on Detroit workdays.

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Employer registrations you will need

Michigan — Income tax withholding: Michigan Department of Treasury
Illinois — Unemployment insurance: Illinois Department of Employment Security (IDES)

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Get the form

IL-W-5-NR — Illinois (official state source)

Illinois profile Michigan profile Full write-up for this pair

Change the inputs

Withholding determination

Answer six questions. The result is a shareable link, so you can paste it into a ticket or an email.

Employee lives inState of residence

Work is performed inWhere the employee physically sits

Employer is based inWhere the work is directed from

Days in the work stateThis calendar year, leave blank if unknown

Wages from work-state daysUS dollars, leave blank if unknown

Arrangement Works remotely rather than at an employer location Remote work is an employer necessity, not employee preference

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This is a determination aid, not advice. StateSide encodes published state rules and applies them mechanically to the facts you enter. It does not know your entity structure, your nexus history, your equity compensation, or the dozens of exceptions that turn a clean rule into a judgement call. Every determination cites the state source it came from — verify against that source, and take anything consequential to a payroll tax professional before you act on it.