What is Courtesy Withholding for Payroll Taxes?

In some states and localities, employees that reside in one city or state and work in another may have rules or guidelines that other state employers are not required to withhold. 

Courtesy Withholding is an optional benefit where employers collect local or state income tax for employees who live in another city or state where they are not required to withhold unless they have nexus.

Nexus describes a business presence in that city or state.

TIP:

Individual local and state tax rules vary. We recommend consulting with the appropriate tax authorities for compliance rules on whether you're required to withhold.