Ohio help please!

[joanmcq]

Client is military domiciled in OH, lives in CA. Spouse is CA resident. Client has a K1 from an Indiana based S-corp that files a composite return for nonresident shareholders.  The k1 income (box 1 ordinary business income) doesn't seem to appear anywhere on the OH return. It's not on line 8 of the IT 1023, and doesn't flow as biz income to Part II. I think I have to enter it, and then indicate it is not OH in part IV?  If I have to use the apportionment in Part III, I have no idea how to do so from the K1info. Right now I just put it all into sales, no OH portion.  

Also, will her dividend income be taxed to OH?

[joanmcq]

It just doesn't seem to be working right.  How can they have 2000 in tax to OH, when none of her income (except maybe the dividends) is taxable to OH?  

[Abby Normal]

Ohio is another state I won't move to after having done their tax returns. A client moved to MD from OH and I had to do 4 tax returns in OH! Sorry I can't help, just commiserate.

[Lion EA]

I have a client with a daughter in college in OH who works a bit there.  What a lot of work for a small income, small tax refund, and small I-can't-charge-enough-for-this prep fee!

[Margaret CPA in OH]

6 hours ago, joanmcq said:

Client is military domiciled in OH, lives in CA. Spouse is CA resident. Client has a K1 from an Indiana based S-corp that files a composite return for nonresident shareholders.  The k1 income (box 1 ordinary business income) doesn't seem to appear anywhere on the OH return. It's not on line 8 of the IT 1023, and doesn't flow as biz income to Part II. I think I have to enter it, and then indicate it is not OH in part IV?  If I have to use the apportionment in Part III, I have no idea how to do so from the K1info. Right now I just put it all into sales, no OH portion.  

Also, will her dividend income be taxed to OH?

Have you read through the instructions for OH military personnel?  Somehow in nearly 20 years of practice here, I've never had a military client.  The OH return begins with federal AGI however so adjustments should be made from that.  Did you put the S-corp income on line 1a of 1023 and deductions below?

For 2015, there is a new IT1040 that taxes business income separately and uses Ohio Schedule IT BUS accessible from line 6 of OH IT1040. If I have time later, I'll try to reconstruct something such as your description.

[joanmcq]

The issue seems to be with the nonresident credit calculation where if I put the military wages I to the calc, I get not enough credit, because the percentage is all fouled up.

her military wages are being subtracted from AGI.

[joanmcq]

Ok, I thought this out really clearly while I was trying to nap this evening and have outlaid the issue a lot clearer.  Here it is:

Client is resident of and domiciled in CA.  Spouse is military and is stationed in CA but is domiciled in OH.
Income is as follows:
Taxpayer CA salary $127,333
Spouse military OH salary $52,333
Spouse s-corp k-1 box 1 income $11,006.  S-corp is in Indiana and she is at .2% shareholder  Corp files a composite return for out of state shareholders and there is IN withholding of $347
Spouse dividend income from brokerage $1350
Spouse capital loss from stock sales ($2,620)

From all I've read, OH military not stationed in OH - not taxed to OH.
Pass-through from an out of state entity to a less than 20% shareholder, not taxed by OH
CA salary on NR client, not taxable to OH.
Dividends of $1350, less capital loss of $2,620 leaves no OH taxable income.

So the IT 1040 looks fine on page 1.  Fed AGI is $194,056, add back some non-ohio tax exempt dividends, subtract military salary and exemptions and we get OH AGI of $137,426.  Odd thing; when I moved the capital loss to OH, OH AGI went up.

On the OH schedule of credits, OH tax before credits is $4587,  there's a joint filing credit of $229.  But then the NR credit is calculating the apportionment of non-OH to OH, and I'm getting 54% OH. and an NR credit of $2,390 leaving  OH tax of $1968.

Something just doesn't seem right.  None of the income should be taxed, but about half of it is being taxed.  The issue is the military salary being counted in the ratio of OH to non-OH, skewing the calculation.

Is this just some screwed up feature of OH or can I claim double taxed income based on the ration and get out of state credits in OH for the income being taxed that isn't taxable?

 

[BHoffman]

Joan - do you belong to the Drake forum?  There are some real smarty pants OH preparers over there who also might be able to help you.