Question

Live in Kentucky but work in Clark County, Indiana. We pay local taxes only. Do we need to file an Indiana return?

Forum|Forum|4 years ago
April 9, 2022
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TurboTax Live Self Employed

Q. Do we need to file an Indiana return?

A. No.

The reciprocity agreement between IN & KY does not apply to local city or county taxes. You are not required to file a county return (part of the IN state forms), but you are also not entitled to a refund of the county withholding (box19 on your W-2), unless there was an error in the amount. If you are subject to a KY county or city tax, you should check to see if the KY city will give you a credit for the IN county tax withheld. KY does allow an itemized deduction (Schedule A) for local tax paid, on the state return.

S

stevemlouky

Yes, you do have to file with Indiana. File Form IT-40RNR (Reciprocal Non-Resident Indiana Individual Income Tax Return) if you only have wages. If you have other income, you have to file Form IT-40PNR. Clark County's current tax rate is 2%.

Reference:

Indiana Dept of Revenue: Who Should File a Tax Return?

Hal_Al

@stevemlouky Thanks for posting that. That is what it seems to say.

But that's not what it means. You only file that form if you want a refund of improperly withheld IN state or county income tax or the correct amount of county tax was not withheld and you owe county tax (or are getting a refund) of the difference.

Reciprocal state workers, with the correct amount of withholding, (and that is the usual thing), do not need to go to the hassle and expense of filing a tax return that says they owe nothing and get nothing.