How do I claim city and county tax refund for Kentucky?

[Hal_Al]

What makes you think you are entitled to one? Refunds are rare.

[janet-s]

Actually, some counties (Kenton) and Covington due allow for refunds if you work outside the area, such as at home outside of the area. Your employer will need to sign the form and you may be subject to taxes in that location.  

[DanielV01]

It depends.  If you live in KY, it will not be possible to get a refund for local and county taxes.  As Hal_Al mentions, KY localities take out the exact amount of tax on your wages.  KY localities only tax income where you work.  (Metro Louisville does tax a Louisville resident at a higher rate than a Louisville nonresident).  Therefore, if you are a Kentucky resident, there is no real way to obtain a refund for local taxes paid to KY.

If you are an Indiana resident, however, you may be entitled to Indiana local taxes.  Indiana localities also tax the income, because Indiana localities tax income to the resident of a county or a worker in the county.  So if you live in Indiana and work in Kentucky, you can receive a credit on your Indiana return for the local tax you pay to the Kentucky city you work in.  Please see the screenshot below on how you enter this in TurboTax.

[Hal_Al]

If you are an Ohio resident , who worked in KY, you can not get those refunded. But if you live in an Ohio city with a tax, they may give you a credit or partial credit. Many do.  You need to check with your city.

[Drew01]

I'm not sure that this information is correct, DanielV01. According to the indiana.gov website (https://www.in.gov/dor/files/ib28.pdf), "A credit cannot be taken for any taxes withheld by or paid to any of these states [with reciprocal agreements] in connection with income from salaries, wages, tips,and commissions. If taxes have been withheld or paid to any of these states, a claim for refund should be filed with that state by filing that particular state’s income tax form for nonresidents."

If I understand this correctly (and I'm not sure that I do!), this means that Indiana residents do get double-taxed on Kentucky's "Local Income Tax" because the reciprocal agreement between Indiana and Kentucky does not apply to that particular tax. This is probably why the Indiana W-2 leaves the "Local Income Tax" box blank, while the Kentucky W-2 has it filled in.

On a different discussion thread, I believe you suggested that the KY "Local Income Tax" should be added to the Indiana W-2 values. I followed that advice and have now received a notification from Indianapolis that I owe them money (another turbo tax user writes of the same experience). Indianapolis has adjusted the total credits "to agree with our records": they simply subtracts the local income tax from my KY W-2 to reflect only the numbers reported on the Indiana W-2 (which leaves "Local Income Tax" blank).

So, it seems to me that Indiana residents should simply disregard their KY W-2 and just accept the fact that they get double-tax on the KY "Local Income Tax".

For the benefit of myself and everyone on the IN/KY boarder, I would greatly appreciate a response that either corrects me or corrects your earlier post.

Here's hoping you're correct!

[Hal_Al]

Some (but not all) IN counties (but not the state)  allow a credit, or partial credit for  tax paid to an OH or KY city or county. That will come up in the IN state interview.  For more, see: https://ttlc.intuit.com/questions/4699137-i-see-no-separate-question-for-school-taxes-in-indiana-lik...

[yougogirls2]

Ok.  I lived in Indiana the whole year and the position was in Louisville, KY.  Can I get my local taxes money that they took out on my paycheck?  My income was based upon Indiana taxes. 

If I cannot get my KY local taxes money back, then I can claim it on out of state local taxes in Indiana?  

KY is a reciprocal, so do I still have to complete a nonresident  state return too?  

Barbara

[AmyC]

You do not need to ask for your local taxes back from KY. Instead, you can claim them on your IN state return to receive a credit for the tax paid. Your IN return combines both state and local taxes. The KY local tax would be a credit up to the amount Indiana locally would have charged on the same amount.

You do not need to file a non-resident return for KY.

To help clarify and navigate:

Regardless of where you work, Indiana will assess local taxes based on where you live (county of residence). But if you are paying local taxes in another state they will give you a credit for the amount of local tax you paid out of state (but only up to the amount of local tax you would have to pay to your Indiana county. They are claimed on Indiana Schedule 6 (taxes paid outside of Indiana). In Turbo Tax:

1. In State Taxes tab, continue to Your County of Employment Screen

2. For County of Employment, Scroll all the way to the end, and select Out Of State-Kentucky

3. Continue your Indiana Return until Take a Look at Indiana Credits and Taxes

4. Select Start on Credit for Non-Indiana Local Taxes

5. Fill in the information on the following screens (locality, what state, and how much local tax paid to state).

TurboTax will calculate the credit.

@yougogirls2

[Edited 1/21/2021 |2:24 pm PST]

[Hal_Al]

Q. KY is a reciprocal, so do I still have to complete a nonresident  state return too?  

A. No, unless KY state tax was erroneously withheld.   The reciprocal agreement does not apply to city and county income tax. KY  cities and counties are allowed to withhold that tax from your pay.  You cannot get that refunded.

Q. If I cannot get my KY local taxes money back, then I can claim it on out of state local taxes in Indiana?  

A. Yes. You cannot get a credit, for KY local income tax against the IN state tax. But most IN counties do allow a tax credit.  The IN county income tax is filed as part of the IN sate return.  If your county is one that allows a credit, it should come up in the TurboTax state interview. 

The allowable credit is equal to the lesser of:
 The amount of income tax actually paid to a locality in another state;
 The amount of adjusted gross income taxed by the locality outside of the state of Indiana
multiplied by the county rate to which the taxpayer is subject; or
 The amount of county tax due on the Indiana return

Reference: https://www.in.gov/dor/files/ib28.pdf

[yougogirls2]

Thanks.  I was reading KY information thought I had too.  I already downloaded KY.  Too bad that I cannot get my money back on that.

[Aam21]

What form is necessary to get a refund of local taxes paid in error for Louisville Kentucky?  The client is a nonresident and filed state taxes as a nonresident. 

[Aam21]

Fortunately the client lives in Georgia and does not work in Kentucky but does computer on line teaching for a Kentucky source while in GA

[Aam21]

Because the state and local taxes were taken out erroneously when the client works outside of Kentucky and is a resident of Georgia

[Hal_Al]

 Most (if not all)  KY cities and counties  administer their local income tax.  It is not handled by the state tax dept. Contact the city (or county) tax dept. for refund forms.  The forms are not available in TurboTax.  Describe your situation to them, as a special form may (probably) will be required.