If your KY return was reject, then you do not need to amend this return. What you will need to do is file this return including ALL income that you received regardless of which state you worked in. You will also need to enter any taxes you paid but ONLY to the state of KY. It sounds like you tried to claim a credit for taxes paid to IN. So you will need to walk the entire way back through your KY return and remove that credit as you are not eligible for that credit since the tax was paid to a reciprocal state. This should straighten out your KY return.
For IN, when you Amend Your Return, you will need to remove ALL income from that state that was earned while a resident of KY and only include the taxes you paid. This will allow you to get a refund of the taxes you paid to IN as it will show you paid taxes but didn't have taxable income there. Your amended return should only include taxes paid NOT income.
This is what error f740-0059 is "KY residents must report all income received including income from sources outside KY. Within certain limitations, a credit for income tax paid to another state may be claimed on Worksheet A. Full year nonresidents may not claim this credit. The credit is limited to the amount of tax paid to the other state or the amount of KY tax savings had the income reported to the other state been omitted, whichever is less. A return must be filed with the other state in order to claim this credit. Credit for tax withheld by another state is not allowed. A credit for tax paid to a reciprocal state on certain types of income is not allowed. The type of income reported to the other state must be listed on Worksheet A. (See Worksheet A instructions for limitations and reciprocal state"
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