I am an IL resident that also worked in KY. Per the reciprocal agreement between IL-KY, I should not be paying any taxes to KY. However, TurboTax is asking $1000 for KY?

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You might not need to file a KY return at all. If no KY tax is shown in Box 17, delete the KY return. If there is tax there, then you want to file a nonresident reciprocal return for KY and not a KY nonresident return.

If what you see on the KY W2 is local tax withheld (in Box 19), these are not a part of the reciprocal agreement, but Illinois does allow you to claim a credit for these taxes. Follow the screenshots at the bottom of the screen (they are from last years program, but still work this year) to claim this credit:

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