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The payments should be reported for the year the payments were made. There would be no averaging allowed or spreading them over years. The taxes withheld will be reported as well and shown on the return. The taxable portion of a retirement benefit payment paid directly are subject to Ohio income tax for Ohio residents. As she was an Ohio resident when the payment was made the amount should be included in Ohio state return also. STRS Ohio retirement benefits are exempt from local or municipal taxes in Ohio.
On request, the state would withhold Ohio income taxes but if no request was made, tax will be due when the Ohio return is filed. Estimated payments should be made now if she wishes to lessen the tax burden at filing.
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