On the federal side of TurboTax, if you're putting in a zero in your W-2, box 16, that's incorrect. You need to enter your W-2 exactly as you see it. The zero adjustment is entered on the state of KY side of TurboTax. When you allocate the income on the KY nonresident income tax return, you would enter a zero in the box.
You should be able to E-file your federal return and your nonresident KY return.
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