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Live in Kansas but work in Missouri - also work remotely from home

I live in Kansas, but my employer's office is in Kansas City, MO.  I do go into the office and some days work remotely from home (in Kansas).  My employer withholds MO tax and the 1% KCMO earnings tax.  I know I need to file both MO & KS, with completing the MO form first.  On the MO form, my remote wages have been deducted, therefore making my MO income percentage 77% (MO-1040 line 32).  

 

When I work on the KS form, TurboTax is showing a credit for the taxes I paid MO.  However, on KS form K-40, line 13 Turbotax is still showing100% of my wages as "total income derived from the other state and included in KAGI.  Is that correct?  It would seem like it would only be 77% of my wages.  I know I can edit the figure, but thought TurboTax would bring it over correctly.

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3 Replies
DMarkM1
Employee Tax Expert

Live in Kansas but work in Missouri - also work remotely from home

Yes, on the MO return the 77% is the proportion of MO source income (allocated not including remote work outside of MO) divided by MO adjusted gross income(AGI), which is federal AGI with MO additions/subtractions as if MO resident. 

 

Yes, the KS return should use the MO allocated amount.  This typically is automatic in TurboTax however, you can adjust the amount in the "step-by-step mode.  

 

Go back to the KS interview and update the "Credits and Taxes" section.  Revisit the "Credit for taxes paid to another state" topic and edit the MO line.  On the next page you can allocate the part of wages that are MO sourced (allocated to MO) and the tax liability on that income on the page after that you can adjust the "Total Income" from MO sources if there was MO income other than wages that need to be accounted for.  If not, then the box should match the MO wage allocation amount. 

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Live in Kansas but work in Missouri - also work remotely from home

Ok, I made the change, but now I'm even more confused.  In going through the step by step instructions, the screenshot below has my information correct.  (The double taxed amount is the 77% of my W2 taxable wages.)

 

turbotax-1.JPG

 

When I accept that information and go on, the total income from MO shows as my W2 taxable wages.

 

turbotax-2.JPG

However, the credit matches what is shown on the MO return as my tax liability.

turbotax-3.JPG

If I change the 2nd screenshot so the "total income from MO" matches what the 1st screenshot shows (which is the 77% of my W2 wages), then the state tax credit is roughly $200 less.  Why wouldn't I get the full credit for my MO tax liability?

Vanessa A
Employee Tax Expert

Live in Kansas but work in Missouri - also work remotely from home

Because the maximum credit you can get is whatever that income would be taxed in KS.  So, if MO's tax on your income is $2,710 and KS tax on the income is $2,500, then the maximum credit you would be able to get would be $2,500.  The credit for taxes paid to another state is limited to the amount that the resident state would charge you if they were taxing that income.  

 

So the opposite could happen as well.  If MO taxed your income at $2,000 but KS wanted to tax that income at $2,500, then you would get a credit of $2,000 and still have to pay KS $500.  

 

Basically, whichever state taxes you the most, that is the tax you will end up paying, either to one state or combined between the 2 states. 

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