Self-employed and working in CO but living in OH

[jmsco290]

I am wondering what I should expect for 2022 taxes if I moved to Ohio during this past year but continue to engage in remote or online work in Colorado.  I am a self-employed mental health therapist who only has clients in Colorado and I have not earned any income in Ohio.  I am also wondering about 2023 taxes as I will continue to work in Colorado but reside in Ohio.  I appreciate any help and suggestions for my situation!

[OmM1]

Hello jmsco290

Discerning from the limited info you have entered it looks like you are conducting your self employed business from OH. You are not just visiting OH on and off but staying in OH, but have not yet made up your mind if you want to be OH resident.

In view of above you may be required to file a non resident tax return for OH, based on all the income you made in OH.

Obviously as long as you  are CO resident, you will report you full income on CO resident tax return and will claim credit for Taxes paid to OH on your OH Non Resident income.

Hope this answers your question

[Hadley]

It sounds like you have established a residence in Ohio and have moved out of CO.  If that's the case, then you'll file two part-year returns for the year you moved, one for each state.

Ohio taxes part-year residents like this: Ohio tax is computed on your total income for the year, and then the tax is multiplied by a percentage based on your non-Ohio income compared to your Ohio income.  The income you earned before you moved to Ohio is your non-Ohio income. The income you earned after you became a resident of Ohio is your Ohio income, even if the clients lived in Colorado.  

For Colorado, you will report your income from before you moved on a part-year return. 

Note this CO rule that appears to apply to you: "Business income from the performance of purely personal services is Colorado source income if the person performing the service was physically present in Colorado at the time" (https://tax.colorado.gov/income-tax-topics-part-year-residents-nonresidents).  It sounds like you're not physically present in Colorado when you're doing the work now, so you would not have to report any CO income in future years.

As a resident of Ohio, all your income is subject to taxation ("An Ohio resident is subject to Ohio's individual income tax on all of their income.").

TurboTax should walk you through the right questions for these scenarios. 

We also have some help articles on how to file peart-year returns: https://ttlc.intuit.com/turbotax-support/en-us/help-article/printers-printing/file-part-year-state-r...

[mfields2]

So the good news is that Ohio provides you an business income tax deduction for up to $250,000 of taxable income.  This is true regardless of where it is earned.

Your Colorado situation is a bit trickier;  it is a bit unclear as to whether the work you do in Colorado is remote work IN Colorado or remote work FROM Ohio to Colorado clients.  I'm going to assume the second is true. 

The business income you earn in Ohio will qualify for the Ohio business income tax deduction (be careful of city taxes, though - most Ohio cities have a separate city tax rate that will apply to this income AND/OR a school district tax that will apply to this income.  Check your address for BOTH municipal tax and School District income tax at the Ohio Tax Finder, here: https://tax.ohio.gov/help-center/the-finder).  The school district and city taxes are RESIDENT taxes, meaning that it does not matter where you earn the money, you are taxed based on where you live and the tax rate that applies there (for instance, if you live in Columbus, you will be responsible for a 2.5% city tax on your net profits from your remote work business, but no school district tax applies). 

For Colorado, you will have a part-year resident return in 2022 for the partial year you spent there.  You will be taxed on all income you earned while a resident; but the income you earned when you are not a resident depends on your continued connection with Colorado.  Colorado uses a factor-presence standard to determine if you have "nexus" for income tax purposes that takes in to account the amount of business property, payroll and overall sales.  Given that all of your sales are to Colorado, the most likely outcome of that factor-based determination is that you would owe Colorado taxes on that income.  So you would report your net income from Colorado (self-employment) as a non-resident on your non-resident tax return next year and going forward.  

[Hal_Al]

For 2023, I don't think you will need to file a CO return.  Your type of income does not appear to be "CO source" income.

"Business income from the performance of purely personal services is Colorado source income if the person performing the service was physically present in Colorado at the time."

 https://tax.colorado.gov/income-tax-topics-part-year-residents-nonresidents

[Hadley]

Good catch. I updated my reply. 

[jmsco290]

Thank you for all of the help!!

I should have mentioned that some of the income is through my single member LLC business and some of the income comes from independent contract work via 2 different companies (also still through my LLC business, but receiving 1099 forms).  Not sure if that changes any of the information provided, but wanted to clarify!

[jmsco290]

Yes, remote work FROM Ohio to Colorado client is a better description of my situation.