Reciprocal agreements are a special type of tax treaty between states. They allow residents who work in a neighboring state to only pay state income tax to their state of residence, not the state where they work. Since your fiancé lives in Kentucky, he only owes state income tax to Kentucky. The Illinois taxes that were withheld from his checks should be refunded to him. In TurboTax he should complete his IL non-resident first, and then complete his KY resident return. He will still owe the KY tax, but get a refund from IL. Please consider filing an IL-W-5-NR with his employer.
Hope this helps!
Cindy
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