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 Illinois income tax.

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

Income tax withheld to

Illinois

Flat 4.95%

Employee certificate

42A809

Certificate of Nonresidence

Unemployment insurance

Kentucky

Localized under factor 1: Localization.

Reciprocal agreement

Yes

Kentucky exempts Illinois residents.

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File 42A809 with the employer

Reciprocity is not automatic. Until the employee files 42A809 (Certificate of Nonresidence) you are legally required to withhold Kentucky tax. Keep the signed form on file; it is not sent to the state.

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Withhold Illinois income tax instead

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

Reciprocity does not cover Kentucky local taxes

Kentucky cities, counties and school districts levy occupational license (payroll) taxes ranging roughly 0.008%-2.5% (e.g., Louisville Metro, Lexington-Fayette). These are administered locally and are NOT covered by Kentucky's state reciprocity agreements -- reciprocal-state residents still owe local occupational tax on Kentucky work.

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Employer registrations you will need

Illinois — Income tax withholding: Illinois Department of Revenue
Kentucky — Unemployment insurance: Kentucky Office of Unemployment Insurance (Education and Labor Cabinet)

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Get the form

42A809 — Kentucky (official state source)

Kentucky profile Illinois 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.