If you were an Indiana resident during the tax year and had income from Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin, you are covered by a reciprocal agreement. This agreement applies only to wages, salaries, tips and commissions. The income needs to be included on the Indiana return and tax paid to Indiana.
If your employer withheld state taxes for the nonresident state, you need to file a claim for refund with that state. You cannot claim a credit for taxes paid to the other state on your Indiana return.
The credit for taxes paid to another state is automatically calculated in your account when you add a Nonresident state return to your already created Resident Indiana return.
If you qualify for the reciprocal agreement, you will need to remove the automatic calculation by logging into your account and go to the State Section>>Indiana Resident return>>County Information. Complete the top portion choosing the state of residence (shown last in the drop-down menu). Click Save and continue to Out-Of-State Income. Complete both the amount of wages received and the state they were received in.
- If the other state is Kentucky, go to the State Section>>Nonresident Kentucky Return>>Basic Information. Go to the Residency Information and complete the questions indicating you are a resident of a reciprocal state (Indiana). Complete one form 740-NP-R for the taxpayer and one for the spouse (if applicable). To claim exempt from Kentucky withholdings in the future, file form 42A809 with your employer.
- If the other state is Michigan, go to the State Section>>Nonresident Michigan Return>>Residents of Reciprocal States>>Enter the total income earned in Michigan while a resident of Indiana as a negative number. To claim exempt from future withholdings, file form MI-W4 with your employer.
- If the other state is Ohio, go to the State Section>>Nonresident Ohio Return>>Subtractions From Income>> Income from Residents of Reciprocal States OR Nonresident Military Income>>Enter the total income earned while a nonresident of Ohio as a positive number. Click Save followed by Back. Scroll down to Form IT-DA (affidavit of Non-Ohio Residency). Select Yes to complete the form. Complete the next two sections indicating your place of Domicile and place of Abode (both should be your resident state). To claim exempt from future withholdings, complete form IT-4NR and file it with your employer.
- If the other state is Pennsylvania, go to the State Section>>Adjustments to Income>>Reciprocal State Wage Adjustment.
- Pennsylvania requires proof that taxes were paid to the other state. You must print and mail the PA return along with a copy of the Indiana state return, the W-2(s) with the PA income and a statement explaining you are a resident of a reciprocal state. To claim exempt from future PA withholdings, file form REV-419 with your employer.
- If the other state is Wisconsin:
- Go to the State Section>>Wisconsin Nonresident return>>Basic Information>>Select Your Resident State>>Save.
- Continue to the Legal Residence Questionnaire. Select Yes to complete the questionnaire. Click Begin for the Residency and Non-residency questions.
- Complete this section as instructed.
- Go to the Federal Section Income Wages and Salaries Edit the W-2 with Wisconsin wages and remove the amount in Box 16. Click Continue to save the information. Disregard the warning about the withholdings amount. To claim exempt from Wisconsin withholdings, complete form W-220 and file it with your employer.
NOTE: The nonresident returns will refund all or most of the taxes withheld. The resident return will calculate an amount owed (usually).