If the taxpayer was an Indiana resident during the tax year and had income from Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin, the taxpayer is 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 the employer withheld state taxes for the nonresident state, the taxpayer will need to file a claim for refund with that state. Credit for taxes paid to the other state can not be deducted on the Indiana return.
Indiana does not provide a credit for double-taxed income in Arizona, Oregon, and the District of Columbia. An Indiana resident filing a nonresident tax return with one of those states or DC must claim a credit for taxes paid to Indiana on the nonresident return.
Indiana Resident return
- County Information - Complete the top portion choosing the state of residence (shown last in the drop-down menu).
- Out-Of-State Income - Complete both the amount of wages received and the state they were received in.
If the other state is Kentucky:
- State Section
- Add or Edit Nonresident Kentucky Return
- Basic Information
- Residency Information - complete the questions indicating taxpayer is 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 the employer.
If the other state is Michigan:
- State Section
- Add or Edit 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 the employer.
If the other state is Ohio:
- State Section
- Add or Edit Nonresident Ohio Return
- Subtractions From Income
- Employee Compensation earned in OH by residents of neighboring States OR Certain Income Earned by Military Nonresidents - Enter the total income earned while a nonresident of Ohio as a positive number.
- Return to the main menu
- Select Form IT-NRS (affidavit of Non-Ohio Residency). Select Yes to complete the form. Complete the next two sections indicating taxpayer place of Domicile and place of Abode (both should be the resident state).
To claim exempt from future withholdings, complete form IT-4NR and file it with the employer.
If the other state is Pennsylvania:
- State Section
- Add or Edit Nonresident Pennsylvania return
- Adjustments to Income
- Reciprocal State Wage Adjustment
Pennsylvania requires proof that taxes were paid to the other state. The return must be printed and mailed along with a copy of the Indiana state return, the W-2(s) with the Pennsylvania 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 the employer.
If the other state is Wisconsin:
- State Section
- Add or Edit Wisconsin Nonresident return
- Basic Information - Select Your Resident State
- Legal Residence Questionnaire - Select Yes to complete the questionnaire.
- Return to the Federal Section
- Income
- Wages and Salaries - Edit the W-2 with Wisconsin wages and remove the amount in Box 16.
Disregard the warning about the withholdings amount.
To claim exempt from Wisconsin withholdings, complete form W-220 and file it with the employer.
Note: The taxpayer may still be liable for county or city taxes in the state where the income was earned. Check with the state for more information.
Additional Information: