I live in kentucky but worked in indiana and i guess i didnt file the state correctly so the refund it showed i would get back from kentucky has been disallowed.

[jeromie]

how do i refile to get my money back from indiana?

[DS30 · Accepted solution]

KY and IN have what is called a state reciprocal agreement. This allows nonresidents to not have state withholding taxes taken out for wages earned in the state.

In order to get the full refund of your IN withholdings, you will need to file a nonresident IN return but report zero "0" income from IN (even though you do have IN wage income). You need to file your IN return this way because IN does not allow a credit for tax paid to a reciprocal state on the  wages, salaries and commissions. If tax was withheld by a reciprocal state (IN), you must file directly with the state for a refund of those taxes.  You must mail in this return and include your state W-2 information. You will want to include an explanatory statement with your KY return stating your situation (that your KY employer withhold KY taxes from your wages in error).

You will include all income from both inside and outside the state on your KY resident state income tax return. You will not be allowed a tax credit for taxes paid to IN on your KY tax return.

To avoid this issue in the future, you need to file an exemption form with your IN employer. Workers exempt under a reciprocal agreement must complete Form 42A809, Certificate of Nonresidence, which must be kept on file by the employer.

[lauraboyfriend]

Shouldn't the answer say.... You will want to include an explanatory statement with your KY return stating your situation (that your IN employer withheld IN taxes from your wages in error).

[r0rese01]

I have a new client who in 2018, received a refund for his Indiana county taxes (which was around $400). His previous tax preparer Paper filed his Indiana Reciprical Tax return and placed zeros Where it asked for indiana income and state withheld but had the local tax filled out and a refund for the exact local tax.  His employer withheld KY State taxes since he lives in Kentucky, but they still withheld Indiana county taxes. I called the Indiana Department of Revenue and they stated he should not be getting a refund for his local tax amount UNLESS he over paid in local taxes. But it seems like the previous tax preparer was able to get my client a refund with his local taxes. Does anyone know what the correct answer is? I would love to get him a refund the same way as the previous tax preparer did but dont want it to bite him in the butt later when he has to pay that refund back.