Answer NO to the question about living in another state and YES to the question about making money in other states. You'll find that question under Other State Income in the Personal Info section.
when I go through my state taxes on the review it it says I owe ky xxx amount in state taxes?
That's correct. Kentucky (like other states) taxes non-residents on income earned within Kentucky - unless they're a resident of Indiana, Illinois, Michigan, Ohio, Virginia, West Virginia, or Wisconsin. That's because KY has a reciprocal tax agreement with those 7 states. But not with TN.
It doesn't ask for the KY taxes until I add a state? should I add the state? it says that our TN taxes are correct
We've never used this before and haven't answered that question or had this issue
TN doesn't have an income tax on wages. You will owe state income tax to KY, since that's where you work. You have to file a KY Non-resident tax return. Here's a link to the Kentucky tax instructions that may help explain things: <a rel="nofollow" target="_blank" href="http://revenue.ky.gov/NR/rdonlyres/42BA483C-F8C6-4EC2-B699-4CA88202BCBF/0/2015740NPPFINAL.pdf">http://revenue.ky.gov/NR/rdonlyres/42BA483C-F8C6-4EC2-B699-4CA88202BCBF/0/2015740NPPFINAL.pdf</a>
You should ask your employer to withhold KY state taxes if they aren't doing so already.
Box 15 of your W-2 would say KY and Box 17 would show the amount of taxes withheld.
If box 15 says KY (I live in TN) and 16 & 17 are blank, does that mean we don't owe taxes or nothing was withheld and we owe the whole thing?
The KY in box 15 just means that the employer was willing to withhold taxes for the state of Kentucky (are they in Kentucky?) - I imagine that they print KY on every W-2 whether they withhold KY taxes or not.
On the other hand, no number in box 17 does NOT mean that you don't owe any taxes to Kentucky - it just means that you didn't authorize your employer to withhold any.
Yes, this likely means that you owe the entire tax due amount, since nothing was withheld. You need to talk to your employer about Kentucky withholding.