I live in Texas and work remotely for company in Indiana

[Nunotmp]

I had local income tax taken out that totaled $2,120 and while filing TurboTax shows a IN refund of $2,120. I filled the state tax but my return was rejected.

On the question "How much of the $xxx did you earn while working IN Indiana?" I answered 0 (zero) and this was the reason my return was rejected. 

Do I need to file a state return? Why am I getting taxes taken out for a county I do not live in? Is this tax refundable?

[ErnieS0 · Accepted solution]

Your Indiana county tax should be refundable because your “principal place of work” is Texas.

Indiana says, “If a person resides in an Indiana county on January 1, or resides out-of-state on January 1, but has his or her principal place of work or business in an Indiana county as of January 1, he or she is subject to county tax at the rate corresponding to that Indiana county.”

You did not live or work in an Indiana county on Jan. 1, 2022, so your employer should not have withheld tax. Speak with them to stop withholding.

See: Departmental Notice #1

If TurboTax rejected your return for $0 wages, you can try refiling with $1 or you can file your nonresident Indiana tax IT-40PNR return by mail.

[Hal_Al]

Q. Why am I getting taxes taken out for a county I do not live in?

A. Basically, your employer "doesn't know any better".  Reciprocal state employees who physically work in IN are subject to county tax (but not state tax) and employers are just use to withholding it.  Try to get them to stop, so you don't have to file for a refund every year.

Q.  Is this tax refundable?

A. Yes. But, you may have to paper file.  I'm not sure putting $1 will work.  If you try it, please let us know what happens, so we can advise others with a similar situation. 

[Nunotmp]

Using $1 did the trick. My return was accepted this afternoon. Thank you for the help!