College son did internship outside of resident state

[chelms]

My son goes to college in KY.  He did an internship over the summer in KY.  Our permanent residence is NC.  His W2 shows that NC taxes were taken out for the job.  I still claim him as a dependent since he is still in college.  Do I have to file a non-resident KY state return for him even though only NC taxes were taken?  

Secondly, everything on his W2 is correct except his address is listed as his college address in KY and not his permanent address in NC.  Does that matter?  Which do I enter for filing taxes.  Thanks in advance for any clarification!

[KrisD15]

Since he is your dependent, his resident state is your state, NC. 

Technically your son should have had Kentucky tax withheld. 

As a non-resident, he should file a non-resident Kentucky tax return and allocate the income he earned in that state. 

Next, he would file a state return for North Carolina claiming all his income. North Carolina will give him credit for the tax he owes Kentucky.

The address on his W-2 doesn't matter. 

I would ask the employer why they withheld NC instead of KY. 

Kentucky does have reciprocal agreements with a few states, but North Carolina isn't one of them. 

According to the state of Kentucky: 

"Any net income of a nonresident shall be subject to Kentucky income tax if it is derived from services performed in Kentucky, from property located in Kentucky, or from income received from a pass-through entity doing business in Kentucky. Income from sources outside Kentucky shall not be subject to Kentucky income tax. Losses incurred outside Kentucky shall not be deductible in computing Kentucky adjusted gross income."

[chelms]

Thank you for that clarification.  One point I forgot to mention.... When I file NC tax return for him, he will get all the state taxes back as he did not make enough income last year to have filed/paid taxes in NC.  After researching a bit about KY,  I believe the MAGI threshold for KY is over $12,000 and he did not make close to that in 2022.  With that said, I can still file the KY nonresident for him, but assuming he would not owe anything.  Thoughts?

[ErnieS0]

Kentucky MAGI is not the same as income earned in Kentucky.

Kentucky modified gross income is the greater of federal adjusted gross income adjusted to include interest income derived from municipal bonds (non-Kentucky) and lump-sum pension distributions not included in federal adjusted gross income; or Kentucky adjusted gross income adjusted to include lump-sum pension distributions not included in federal adjusted gross income.

Kentucky MAGI is $13,590 for single. 

If your son's total income from everywhere is less than that, they he does not have to file a Kentucky return.

Since his employer did not report any Kentucky income or take out any KY tax, you would not have to file if you son meeting the non-filing requirement.

Do I Need to File a Return

[chelms]

Thank you!  The FAQ's on the link you attached were also very much my son's situation.  While in college, my son doesn't come close to even 10K in total income whether it be summer internship or part time work while at school.  So regardless of whether NC or KY state taxes are taken out, I'm only filing so he can get the refund.  Might be easier to simply have him claim exemption if we know he won't  be making enough to even have to file.

Thank you for your help!  Definitely appreciated!