topic Filing in Indiana and Kentucky in State tax filing

Filing in Indiana and Kentucky

bpeabody81 — Wed, 24 Feb 2021 18:16:58 GMT

My husband and I live in Indiana. My husband's employer is located in Kentucky, but he is working from home the entirety of 2020 due to COVID. I work in Indiana. The HR department at my husband's employer did not realize his department was working from home until 12/2020. State taxes were taken out for Indiana for my husband, but not for Kentucky. Local taxes however were taken out for both Indiana and Kentucky. Also, the local wages reported for Indiana and Kentucky in box 18 on the W2 are different, Kentucky is reported at a higher wage amount than Kentucky. Do we need to file state taxes for both Indiana and Kentucky, although no state takes were taken out for Kentucky, only local. Also, should we expect an refund for local taxes paid for either Kentucky or Indiana, or are these local taxes due for each state?

Re: Filing in Indiana and Kentucky

LenaH — Wed, 24 Feb 2021 18:54:30 GMT

No. You are only required to file a resident Indiana return, since no Kentucky taxes were withheld. Indiana and Kentucky have a reciprocal agreement. This means that all salaries, wages, tips, and commissions earned in Kentucky by an Indiana resident must be reported as if they were earned in Indiana. If taxes have been withheld or paid to Kentucky, a nonresident return would have to be filed for a refund of state tax.

Since there were no Kentucky state tax withholding, you would not need to file a nonresident return for Kentucky. The way your husband's employer taxed him was correct.

If he has not already, your husband must submit Form 42A809 to his employer to make sure no Kentucky state tax is withheld in the future.

As far as the local taxes withheld, If you work in Kentucky and live in Indiana, you may get a credit or partial credit on your Indiana return for paying local tax to the Kentucky. This will depend on the rules and regulations of your resident county. If they do allow the credit, then you will see it on your interview screens when you are going through your Indiana state tax return.

Re: Filing in Indiana and Kentucky

bpeabody81 — Wed, 24 Feb 2021 19:05:13 GMT

Thank you!