What Do I File If I Have Income From A Neighboring State?

Mar 06, 2015

My father, who is an Indiana resident, recently asked me what type of Ohio return he needed to file since he had some income from Ohio during 2014. Earning an income in a neighboring state is certainly a familiar situation for many Northwest Ohioans, being so close to both Indiana and Michigan. Many states have helped to ease the filing burden on residents with out-of-state income by signing reciprocal (reciprocity) agreements with neighboring states. For example, Ohio, Michigan, and Indiana are reciprocal states.. This allows residents of one state to request an exemption from withholding for wages earned in a second reciprocal state. Therefore, only a return for the resident state needs to be filed.


Depending on the state, there are slightly different requirements. The requirements for Ohio, Michigan and Indiana are as follows:

Ohio:  A full-year nonresident living in a border state does not have to file if the nonresident’s only Ohio-sourced income is wages received from an unrelated employer. Nonresident employees in Ohio should file IT-4NR with their employers to be exempt from having to withhold Ohio income taxes.

Michigan: Residents of reciprocal states working in Michigan do not have to pay Michigan tax on their salaries or wages earned in Michigan. The following states are reciprocal with Michigan: Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. Nonresident employees in Michigan should file MI-W4 with their employers to be exempt from having to withhold Michigan income taxes.

Indiana: If you were a full-year resident of Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin, and your only income from Indiana was from wages, salaries, tips or commissions, then you need to file Form IT-40RNR, Indiana Reciprocal Nonresident Individual Income Tax Return. You aren’t required to pay Indiana income tax, but you are required to file the Indiana form to pay any Indiana local and county tax owed. Nonresident employees in Indiana should file WH-47 with their employers to be exempt from having to withhold Indiana income taxes.

If taxes from a non-resident reciprocal state were erroneously withheld, you would need to file a return in that state to be able to have it refunded. My father Reciprocal Nonresident Individual Income Tax Return was glad to hear that with Ohio being a reciprocal state of Indiana, he didn’t have to file a return in Ohio, saving him time and money. See your tax professional for more guidance.

By: Brent D. Ringenberg, CPA

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