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Client lived in PA 6 months, earned $18k, then moved to OH last 6 months, earned $18k. On OH state return the Exemption amount of $2400 is coming off $36k and thus taxing the balance at the full amount. Should it not be taking the exemption off just $18k? Am I not understanding OH correctly? I feel it should only tax at the income earned while a resident of OH, not the whole Federal amount. I can't figure this out. Any help appreciated.
Kevin
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Look at the whole return, the total gets taxed and then a decimal is created dividing OH income by total income and applied to the total tax that results in a reduction.
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Hmm. I guess I'm not seeing that in Pro Series. They had $400 withheld on OH job, and since they earned under $25k (in OH) I would expect a refund of that amount since there's no tax on income under $25k.. Instead it's taxing everything, minus the $400, leaving a refund of only $150, give or take.
I'm not checking off some box properly. I need assistance within Pro Series to only show $18k being taxed. Or I'm not seeing that "decimal" you referred to.
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Did you complete the Part Year Resident section of the Federal Information worksheet and the State Allocation Worksheet ?
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Oh I see the decimal now so Ohio must tax non-resident income and applies a credit. Ohio's rules are misleading. Their OH income should not be taxable (under $25k) but it prorates a tax on all of the income sources. I guess the reciprocal agreement doesn't apply in this case because I interpret her refund to be $400, which was all of the OH withholding.
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No, I missed that but did now. I don't do many out of state moves like this. It did not, however, change the OH refund.
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My guess is the reciprocal rules don't apply since it is PY resident PA and PY resident OH. But I don't know that for sure.