Question

Reporting Business and Other Income on a Nonresident State Return

Forum|Forum|2 years ago
October 14, 2023
2 replies
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I have income earned in a second state (Ohio), so I'm completing the second state return using "nonresident" status. (I already completed the Federal and Personal sections and the State return for my home state.)

After beginning with types of income that Ohio handles differently than the federal government and Ohio credits and taxes, TurboTax moves on to Income Allocations. It automatically transfers wages I reported on my federal return to the "Federal Income" box next to "Wages, salaries, tips, guaranteed payments" and includes a box to report how much of these to allocate to Ohio. For, me, it's 0, because my Ohio income was not from wages. Below that are similar boxes for "Nonbusiness income (loss) from rental and royalty activity." I reported none of these on my federal return, so nothing appears in the federal or Ohio boxes. The third row of boxes is for "Lottery and casino winnings."

The next section deals with "Additional Business Apportionments," and asks, "Do you have any non-Ohio source income from self-employment (federal schedule C, E, or F), or from a pass-through entity.?" Since I have self-employment income in my home state, I answer yes, and then it begins to ask lots of questions about my businesses that I already provided information about in the Federal section, but it doesn't transfer any of that information to the Ohio section for me (such as the names of the businesses, EINs, etc.). It even asks for figures that TurboTax calculated itself, such as the net profit or loss shown on 1040 Schedule C. I don't understand why it's asking about non-Ohio business income to begin with, but even if I have to provide this information, why isn't TT filling in information and figures it already knows, and that I don't even know unless I change over to Forms view and copy them off of the federal 1040 that TT has prepared for me already. The fact that TT isn't filling in this information for me is giving me the impression that I'm doing something wrong. (Incidentally, there's a TT help article about filing nonresident state returns that explicitly says, "Only report the income attributable to the nonresident state." This seems to contradict the fact that it's asking me about non-Ohio source self-employment income.)

Finally, there's the biggest issue: The income I earned in Ohio was neither wages nor business income. It's income from a fellowship grant that I reported as "Other Income" in the Personal section, but nowhere in either the Federal, Personal, or State sections does it allow me to indicate that it is that income that I earned from Ohio. In fact, if I follow the Ohio section all the way through, it ends up only considering my federal AGI and Ohio personal exemption in calculating my Ohio tax, without ever taking into account which part of my income came from Ohio.

When it comes to completing this nonresident second state return, it seems like it should be very simple. Before beginning the Ohio return, the only information TurboTax didn't already have regarding my income was which income I earned in Ohio. I don't understand why it isn't doing more of the work for me, why I'm having to copy information from the federal forms it completed for me, and why it isn't allowing me to indicate which part of my income is relevant to this second state return.

TurboTax Home & Biz Windows

Hal_Al

Employee

What are the details of you "fellowship grant"?

Taxable scholarship is not usually considered income sourced in the state where the student attends school. So, if the fellowship is essentially a scholarship, you do not need to file an Ohio return.

Another issue: You may want to report the grant as "scholarship income" (line 8r of Schedule 1, rather than "other income" (line 8z of Schedule 1). Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $12,950 filing requirement and the dependent standard deduction calculation (earned income + $400). It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.

That said, I tried doing your situation on my desktop Deluxe software. Like you, I am not getting the "other income" box to allocate to Ohio. There appears to be a glitch. You may need to contact support.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/account-management/turbotax-phone-number/L0Od33nMQ_US_en_US?uid=lcfabrtm

Another possibility: This is the TT program telling us that only the presented boxes (wages, business, rentals, lottery winnings) can be considered Ohio source income.

Hal_Al

Employee

I edited my reply. See last paragraph.

T

TomD8

Employee

"(I already completed the Federal and Personal sections and the State return for my home state.)"

With TurboTax, it is critical to complete your non-resident state tax return before you do your home state tax return.

This important because your home state can tax ALL your income, including any income from a non-resident state. A non-resident state can tax you only on income sourced to that state. In that circumstance your home state will credit you for tax paid to the non-resident state, but in TT the credit only works if you complete the non-resident state return first.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.