Multi- State return issues

[AWorman]

Hello,

Help! Can someone please provide information on the following question.

I lived in the state of Indiana all of the year I am filing for and all the income made was made in the state of Indiana not KY. The 1099-NEC I received for self-employment is from a KY source, however. I got confused since the money was earned in IN not KY. So I paid the estimated taxes to IN. for 2022 and seems I actually needed to pay this to KY. 

1. As I am putting in the information and money all earned in KY, it is not refunding me the total amount, over $500 less of the estimated taxes I paid to IN.  How do I get this refunded? (Why is it not refunding it.) I put in for the credit but it was half what I paid them.

2. Do I owe KY penalties and late fees since I didn't pay my quarterly estimated taxes to them? If so, how do I calculate this?

3. I filed all my income under IN for 2021 taxes and KY refunded most of the estimated taxes I had paid back to me which was incorrect. Do I now have to amend 2021 taxes for Ky? And IN? If so, how??

Open to other helpful feedback as I am struggling with correcting this.

Thank you kindly!

[MaryK4]

If you worked in Indiana, it is Indiana income and does not have to be reported to Kentucky.  The location of  payer of the 1099-NEC does not matter if you did the actual work in Indiana.  Can you clarify why you are filing the Kentucky return?

As an Indiana resident, you do not automatically get a refund of estimated taxes paid- you still have to report the income to Indiana and the estimated payments are applied to any taxes owed.

Yes you would have to pay the penalties and interest of you did not make the estimated tax payments to Kentucky- but note, self-employed are treated like normal employers with regard to the reciprocity agreement- so you could file and pay in Indiana only.

I do not think you have to change your 2021 tax returns, but if you do, just follow these steps to amend:  How to File an Amended Tax Return with the IRS - TurboTax.  The entries after you set up the amended returns are similar to your entries for this year.

[AWorman]

Hi Mary,

Thank you so much for getting back to me.

I file KY because the LLC is set up in KY. and because the income source is from KY.

I thought the same thing that if I earned it while physically in IN. I pay estimates to IN and not KY anything, hence why I did pay IN last year not KY.  (Which I think is true in most states except for in KY, of course) However, the KY website say "​​Individual Income Tax is due on all income earned by Kentucky residents and all income earned by nonresidents from Kentucky sources" and the KY and IN revenue offices when I called that it needs to be paid to KY. because the source was KY source.

I will look into the reciprocity agreement. I was under the impression that this was for only normal employers not self-employment.

If I do need to pay estimated to KY do you know how I figure the interest and penalties out?

This is all a little confusing to me, forgive me.

Thank you again Mary!

Amber Worman