Filing correct forms may yield refunds

Out-of-state students have two state income tax forms to fill out if they worked in Ohio during 2007 – and a way to avoid the hassle in the future.

Kent State had about 17,000 out-of-state students attending the university in 2007. Some of these students chose to work in the state of Ohio and are now filing tax forms in more than one state.

Working out of state means paying that state’s taxes. If students who work in more than one state file their taxes only in their home states, they will only receive a refund from that state.

William Lupone, of Lupone CPA & Associates, a tax preparation firm in Pittsburgh, said filing only federal and home-state income tax returns will not give the person the full refund he or she worked for.

“You can’t brush it aside,” Lupone said. He said people do tend to disregard having to file in two states, filing only in their home state.

“But chances are you’re probably just cheating yourself,” he said.

Lupone said to read the instructions for both states’ income taxes. These can be found on each state’s revenue Web site as well as in the income tax booklet.

On the Ohio IT-1040 form, a nonresident must fill in the corresponding bubble for “nonresident.” There is a space provided to write the abbreviation of the tax-payer’s home state next to this.

Out-of-state taxpayers who worked in more than one state in 2007 are to write both their combined income and the income earned just in Ohio on this form. A person cannot claim all combined wages earned; only the wages from that state can be claimed on each state’s tax form.

The Pennsylvania state revenue Web site has an online brochure, “Personal Income Taxes for College Students,” which gives information for college students living and working outside of their home state. This brochure explains that students may be able to claim Resident Tax Credit. Taxpayers should check their home state’s income tax instructions or call a tax preparation professional to see if they are allowed to claim credits for taxes paid in Ohio.

Many out-of-state students can avoid this hassle entirely because Ohio is a “reciprocal agreement state.”

According to Payroll-Taxes.com, “If two states have a reciprocal agreement and an individual lives in one of those states and works in the other, the individual will only be subject to the income tax in the state where he lives.”

Ohio is in a reciprocal agreement with Indiana, Kentucky, Michigan, Pennsylvania and West Virginia. Some employers fail to explain this to their new hires, so Lupone suggested asking the employer about the reciprocal agreement as soon as students begin work outside of their home state to avoid filing taxes in two states.

“I had no idea I could avoid paying taxes in two states,” said Amanda Denham, a sophomore art education major from Pennsylvania who works at the Chipotle on Main Street. “I didn’t start working there too long ago. Hopefully I can speak with my manager and figure something out.”

The Employee Statement of Residency in a Reciprocal State form for Ohio, the IT-4 NR, is available on the Payroll-Taxes Web site. It is a simple form to fill out that can save a student from future hassles.

Contact student finance reporter Sarah Steimer at [email protected].