Frequently Asked Questions

The Ohio Department of Taxation has compiled a list of frequently asked questions covering many different categories.

To view the questions, click on the "Select Category" bar and then click on the category you are interested in.  A list of questions will appear pertaining to that category. Then click on the question you are inquiring about and the answer will appear.

In the example provided below, what is the effect of R.C. section 5733.40(A) (7) on Ohio's reciprocity agreements with other states?

Example: A related member nonresident shareholder of an Ohio S corporation lives in Michigan and works in Ohio as an employee of the S corporation.

  • Does the reciprocity agreement between Michigan and Ohio apply with respect to the employee’s wages if the nonresident joins in the filing of the Ohio PTE composite return, Ohio form IT 4708?
  • Does the reciprocity agreement between Michigan and Ohio apply with respect to the employee’s wages if the nonresident is included in the Ohio PTE withholding tax return, Ohio form IT 1140?
  • If the reciprocity agreements do not apply with respect to nonresident related members that work in Ohio, has the Department of Taxation notified the states with which the department has reciprocity agreements?

5733.40(A) (7): For the purposes of R.C. Chapters 5733 and 5747, guaranteed payments made by a partnership or by a limited liability company that is not subject to the tax imposed by R.C. 5733.06 and compensation paid by an S corporation to its shareholders, shall be considered a distributive share of income of the partnership, limited liability company or S corporation. Division (A)(7) of this section applies only to such payments or such compensation paid to an investor who at any time during the qualifying entity’s taxable year holds at least a twenty percent direct or indirect interest in the profits or capital of the qualifying entity.

The department’s position is that the reciprocity agreements do not apply with respect to wages which an S corporation pays to a shareholder-employee if the shareholder-employee is a “20% or greater” direct or indirect equity investor in the S corporation. See, also, the final determinations for Paul M. & Annette E. Neumann and Timothy Hunt & Leslie Niepp issued on November 3, 2004 and June 3, 2005, respectively. The department did not notify the reciprocity states.

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