Confused on multi-state tax filing

[mbog]

Hello,

I have been using TurboTax for over 10 years.   This year, we have a more complex multi-state tax situation that has been confusing to me in a few areas.   I would appreciate any advice you could provide.

 Here's our tax situation for 2023:

- My wife and I are filing our tax return as joint married.

- I live and worked in CA. 

- My wife lived in KS but worked in MO.   She has paid most of the taxes to MO but some to KS as well.

- We have sold our long-time home in CA.   In addition to capital gain from that, we have some capital gains in in our joint investment account and I have some gains from selling stocks via my employer's ESSP.

- For all three states, TurboTax uses non-resident status.

I assume we report my wife's MO income in KS return but then I don't see an option in TurboTax for claiming credit for taxes paid to MO.   I am worried that we may be double taxed without that.   What is the correct way to handle this?

In CA taxes, TurboTax asks what percentage of the capital gains do we need to allocate to CA.  It seems that TurboTax is not able not determine this automatically.   I am thinking that gains from the house and ESPP sales would be allocated to CA fully, but how should the gains from our joint investment account be allocated?

Thanks,

M.B.

Another qu

[DianeW777]

Yes, we can break this down so that you know what should be reported on each state return and how to file.  Several states can cause some work on your part to make sure they are complete and accurate.

• California (CA) - all of your income and the sale of your house would be reported to this state.  You can split your joint account income and each report their share on their state.
• Kansas (KS) - All of your wife's income will be taxed to KS and Missouri (MO). On the KS return, you should receive a credit for taxes paid to MO. You may need to write down the actual tax liability in the MO return just to be sure you have the right credit on the KS return.  
  • When you are in the KS return, you will watch for the screen for Credit for taxes paid to other states.  In TurboTax this should be automated based on the W-2 and the presence of the MO tax return. See the KS instructions, page 7.  Be sure to mark the appropriate residency on both states.

KS Law: Kansas law provides that if a husband or wife is a resident of Kansas while the other is a nonresident of Kansas, and file a Married Filing Joint federal return, they must file a Married Filing Joint Kansas return and file as “nonresidents” of the state of Kansas.

CA Law: if you file a joint return and either spouse/RDP was a nonresident or a part-year resident in 2023, file Form 540NR, California Nonresident or Part-Year Resident Income Tax Return.

Exception for changing your filing status for CA: If you file a joint return for federal purposes, you may file separately for California if either spouse was one of the following: 

• An active member of the United States armed forces or any auxiliary military branch during 2023. 

• A nonresident for the entire year and had no income from California sources during 2023. 

@mbog 

[mbog]

Hi,

Thanks for the answer.   Unfortunately, I don't see credit paid for other states section under the Kansas Credits screen.   At the top level of these screen, two of the options I see are:

Other Credits > Other Credits and Carryovers 

Other Credits > Refundable Credits

When you start them, neither of these show a section for credit paid to other states.

Any thoughts on how to go about this?

Thanks

[mbog]

Hi,

Playing in the forms view, I was able to create a KS worksheet for state paid to other taxes.

However, when TurboTax runs a check, it says that this credit cannot be claimed by non-residents.

That may be the reason why it does not show this credit.

On the other hand, I don't see if that should the case based on the text (pasted at the end of this message) I see in KS K-40 instructions.   Could this be a issue in TurboTax?

Thanks

---

TAXES PAID TO OTHER STATES BY PART-YEAR RESIDENTS THAT FILE AS NONRESIDENTS

If you are filing as a nonresident of Kansas you may claim this tax credit if:

• You were a Kansas resident for part of the year,
• Your total income reported to Kansas includes income earned in the other state while you were a Kansas resident, AND
• You were required to pay taxes on that other state’s income.

[DianeW777]

States can be a somewhat difficult with a situation like yours.  I would suggest to use your KS return with your worksheet and mail it with your copy of the other state tax return where the income is being taxed twice.  It wouldn't hurt to explain it as well.  It's not likely it will be allowed to be e-filed.

@mbog