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1099 NEC compensation

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.

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3 Replies
DianeW777
Employee Tax Expert

1099 NEC compensation

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.

  1. Report the sale in the state where the property resides.
  2. 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:

  1. the tax liability actually charged by the nonresident state, OR
  2. the tax liability that would have been charged by your resident state
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1099 NEC compensation

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?

BrittanyS
Employee Tax Expert

1099 NEC compensation

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 

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