Teleworking employees need to evaluate their current working situation and apply existing Pennsylvania tax laws. This is based on reciprocal agreements between Illinois and these states.Each state has different tax rules regarding payroll withholding for out-of-state employees. Here's what to know about managing out-of-state employees. Pennsylvania law requires withholding at a rate of 3.07 percent on non-wage Pennsylvania source income payments made to nonresidents. Employers are expected to withhold state income tax from an employee's wages if that employee is subject to state income tax unless noted below. The laws of the two states where you live and work will determine how you file taxes if you don't live in the state where you work. If you only worked remotely then your income is considered PA income. Unfortunately Illinois does not have tax treaty(reciprocity) with Pennsylvania. Withhold tax) just for a couple days work in the state?