topic 1099 NEC compensation in State tax filing

1099 NEC compensation

macck — Sat, 25 Jan 2025 21:25:54 GMT

I live in West Virginia and received compensation reported on a 1099-NEC for work performed in Ohio. No taxes were withheld. Do I owe taxes on this compensation in the state of Ohio? Do I need to file a Ohio return? I know W-2 wages would not be taxable in Ohio but not sure about 1099NEC/Sole proprietor compensation.

Re: 1099 NEC compensation

DianeW777 — Sat, 25 Jan 2025 21:46:41 GMT

Yes, and you must include it on your resident tax return as well. Many states have what is called 'reciprocity'. In your situation it would apply to Ohio, however it applies to wages, not self employment. Since your income is self employment, or business income, then the net profit is taxed to Ohio and West Virginia. This allows you to use the credit for taxes paid to another state on your resident return for the tax you pay to the nonresident state where the income is also being taxed.

Per Ohio: Do not include any Ohio sourced business income for reciprocity. OH Instructions Form 1040-OH page 20.

Once your federal return is complete follow the instructions below.

State Returns - Assumes both states require income tax returns to be filed: Prepare the nonresident state first.

Report the sale in the state where the property resides.
Report it on your resident state and receive credit for taxes paid to another state.

Credit for taxes paid to another state is allowed by a resident state when the same income is being taxed to another state. Your resident state does not want you to pay tax twice on the same income. The credit that is allowed will be the lesser of:

the tax liability actually charged by the nonresident state, OR
the tax liability that would have been charged by your resident state

Re: 1099 NEC compensation

macck — Sun, 26 Jan 2025 12:37:32 GMT

Thank you. My spouse also has income earned in West Virginia (none in Ohio). Do we need to file jointly in Ohio or can I file separately in Ohio, then file jointly on the federal and West Virgina returns?

Re: 1099 NEC compensation

BrittanyS — Sun, 26 Jan 2025 13:08:10 GMT

Ohio does allow you to file a Married Filing Separate return if the following applies:

you filed a Married Filing Joint Federal return
one spouse is a non-resident of Ohio
the non-resident spouse had no income for Ohio

If you file Married Filing Separate for Ohio, you can still file Married Filing Joint for West Virginia and your Federal Return.

@macck

Re: 1099 NEC compensation

macck — Sun, 13 Apr 2025 11:54:05 GMT

Hi, I want to clarify something on this post. Both of us live in West Virginia. I earn wages (W2) in WV, nothing in Ohio. My spouse lives in West Virginia but receives self employment income (1099-NEC) from an Ohio Source. Your last post says one person is a non-resident. Does this mean at least one person is a non-resident?

Also, with TT the Ohio return creates a federal return with my spouses income only. Given that is not the actual return we filed with the Fed is it appropriate to send it in to Ohio?

Thank you

Re: 1099 NEC compensation

AnnetteB6 — Sun, 13 Apr 2025 15:31:01 GMT

Before you continue with a return for Ohio, you should clarify the two conflicting statement you have made regarding the self-employment income.

In your initial question you stated you received a 1099-NEC 'for work performed in Ohio'. If this is true, then you do need to file the Ohio return.

Then, in a more recent response you stated that the 1099-NEC is self-employment income 'from an Ohio source'. If the work was not performed in Ohio, but in West Virginia where you are a resident, then no Ohio return is required. You would not file an Ohio return just because the income is coming from an Ohio source.

That being said, to answer your questions if you do need to file the Ohio return, the requirement that one spouse should be a non-resident of Ohio and has no income from Ohio would apply to your situation based on the information that you shared. Also, the Married Filing Separate Federal return that was created in order to file the Married Filing Separate Ohio return should be included since it shows how the numbers on the Ohio return were derived.

@macck

Re: 1099 NEC compensation

macck — Sun, 13 Apr 2025 16:04:32 GMT

Thank you. The works was performed in Ohio. Sorry for the confusion.

I was very concerned about sending a fed tax return different then we filed. (TT had the MFs return as part of the required filings for Ohio). Also wanted to confirm MFs for Ohio applied if both were non residents.