FAQs - Employer Withholding

I have an employee that lives in a state neighboring Ohio. Must I withhold Ohio state income tax from their wages?

No. Ohio has a reciprocal agreement with the five states that neighbor Ohio. These five states are Indiana, Kentucky, Michigan, Pennsylvania and West Virginia. The reciprocal agreements provide that Ohio will not impose state income tax on the salaries, wages, tips and commissions of residents of these five states. Employees of these states that work in Ohio should complete form IT 4NR, Employee’s Statement of Residency in a Reciprocity State, and file that form with their employer.

However, the reciprocity agreements do not apply to compensation paid to Ohio nonresident investors that hold a 20% or more interest in a pass-through entity, where the pass-through entity has nexus in Ohio; this compensation is reclassified as a distributive share of income and is not considered wages (please see the instructions for Ohio form IT 1040 for more information on this item).