Iowa income tax withholding is applied to the same wages and compensation to which federal income tax withholding applies. Agricultural Wages Wages paid to agricultural labor are subject to withholding for state income tax purposes to the same extent that the wages are subject to withholding for federal income tax purposes. Iowa and Illinois Iowa and Illinois have a reciprocal agreement for individual income tax purposes. At this time, Iowa ‘s only income tax reciprocal agreement is with Illinois . Any wages or salary made by an Iowa resident working in Illinois is taxable only to Iowa and not to Illinois . Any wages or salary made by an Illinois resident working in Iowa is taxable only to Illinois and not to Iowa . An Iowa resident working for wages or salary in Illinois should complete and file Illinois form IL-W-5-NR Employee’s Statement of Nonresidence in Illinois with the employer so that the employer will be aware it is appropriate to withhold Iowa income tax.
