Many states have reciprocity agreements with neighboring states to simplify nonresident income tax filing. New York and New Jersey, however, do not have a reciprocity agreement.
If a taxpayer lives in one state but works in the other state, they must file two state income tax returns:
- A resident return for the state in which they reside.
- A nonresident return for the state in which they work;
Note: Always complete the nonresident state return(s) first before completing the resident state return so that the resident return can accurately calculate the credit for taxes paid to the nonresident state(s).