Throughout the United States, there is a large percentage of the workforce that crosses state lines to work. Resident of one state may seek employment in another, especially if they live near a border that makes the commute simple. However, this can mean a more difficult tax season for those that commute.

Thankfully, many states have adopted reciprocal tax agreements that makes working in one state and living in another manageable at tax time. Those who work in the state of Kentucky are covered under a reciprocal agreement if they are residents of Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin. This means they only have to file a tax return in their home state, claiming any income they earned in Kentucky. Employees should submit Form 42A809 to their employer to qualify for the reciprocal agreement exemption.

Reciprocal agreements only cover income earned from employment. Any monies made from gambling winnings, consultation fees, rental properties, personal property sales, or other forms of non-employment income will have to be reported on a non-resident tax return in the state of Kentucky.

If Kentucky withheld income tax on employment income by mistake, you’ll need to file a non-resident return in order to claim a refund of the money owed to you. Additionally, any residents of states not covered by a reciprocal agreement with Kentucky will have to claim earned income on a non-resident return, as well as report the income from Kentucky sources on their home state tax return.