Kansas City earnings tax

[Posttoastee]

When reviewing my Missouri return it tells me to check this entry:

Form MO-A:TP-Kansas /St Louis Refund should not exceed the prior year state and local tax refund reported as taxable on your Federal return. 

Because of covid-19 we worked from home most of 2020.  I'm not sure what my mistake is.  It's saying it's not ok for mine but it is for my wife's.  

[BillM223]

By chance, did you take the Standard Deduction last year? If so, then you can enter zero for the Form MO-A:TP-Kansas /St Louis Refund (which is indeed your refund, because of the TP for Taxpayer).

When you take the Standard Deduction in the year that the tax refund is from, the tax refund is not taxable (because you didn't get a deduction for it in the previous year).

Let us know if this does not work for you.

[Posttoastee]

Thanks, I see that I can change mine to zero on that form but is still having my wife's KC Local tax on the form without the ability to take it out.  It says check this entry,,  Form MO-A:TP-Kansas /StLouis refund should not exceed the prior year state and local tax refund reported as taxable on your Federal return.  The State Income Tax Refund Smart Worksheet looks like this:

                                                                                        yourself                   spouse

A.total state & local refunds from 2020                       -                                      -

B.minus any refund from 2020 KC or St Lou             431                                  319

C. remaining state and local refunds from 2020         -                                        -

my problem is the only box i can make a change to is line B for myself. nothing else can be changed.  would that  be the right way to do it? or would it need to be changed somewhere else?  Thank you!

[DMarkM1]

In the federal interview under the "Wage & Income" tab revisit/update the 1099-Misc and Other Common Income section, "State and Local Tax Refunds."  There you can remove the Kansas City or St Louis refund entered, since none was taxable.

[taxban]

Hello, I'm facing this same issue. I've verified that what is entered for the locality refund for KC on the federal form is not less than what is entered on the MO form. However, the error remains.

Why is the recommendation to zero out the entry? Yes it may not be taxable, but It's terribly confusing and/or a bug in the program.

[DMarkM1 · Accepted solution]

You are correct.  You cannot have a taxable MO state/local refund amount that exceeds the total taxable state/local refund amount found on your 1040 Schedule 1, Line 1.  So if your state/local tax refunds are non-taxable (zero on Schedule 1, Line 1), then in the MO state interview when you are separating items between taxpayer and spouse, you arrive at a page asking you to allocate the state/local tax refunds.  If none of the refunds were taxable, you need to enter zero in the boxes for taxpayer and spouse.   

Your entries in the MO state interview for state/local refunds cannot exceed that Schedule 1 amount. 

The "Learn More" hyperlink on that MO interview page explains that only "Taxable state/local refund amounts" are applicable. 

Of course if there is a taxable amount on Schedule 1, Line 1 then you should put in whatever part of that amount is MO refund and allocate to each spouse.