Working in MO and staying in KS. How to avoid double tax ?

[DanielV01 · Accepted solution]

It depends.  Those states each require a tax return.  You will file as a resident for Kansas and a non-resident for Missouri.  Kansas will give you a credit for the tax you pay in Missouri, but only up to the amount of Kansas tax on the same income.  So if you earned 50,000, and Missouri taxes you 2000 but Kansas only taxes you 1800, you will receive a credit of 1800 on your Kansas taxes to bring it down to zero.  You will not be reimbursed further.  And if Kansas has a higher tax rate than Missouri, you will have a balance you still owe to Kansas.

To avoid the double-taxation (or at least the need to fill out two state returns), unfortunate about the only two real options are to either move to Missouri (working and living in Missouri) or work in Kansas (living and working in Kansas). 

Having said that, TurboTax will make sure you are not over-taxed.  In the Personal Info Tab, make sure you answer “yes” to the question if you worked in another state besides Kansas and select Missouri.  Fill out your Missouri return first and TurboTax will transfer all of the necessary information to your Kansas return to calculate and apply the credit.

[Anonymous]

at what point in the turbo tax process do i see the credit for my KS balance due?

[ruru1999]

Hello,

Just received a nice letter from the Kansas Department of Revenue saying for the year 2017 they were "unable to verify the amount of Withholding claimed.  Please submit all W-2s and 1099-Rs depicting KS withholding." The total balance they are saying I owe is significant.  

I pulled out all of my documentation and the exact amount they say they are unable to verify was  listed on a W-2 from a job I had in Missouri.  I was not at this job the whole year.   The way I understood it is that KS would give me a credit for work performed outside the state.  For the year 2017 I did file a KS and a MO tax return and listed I was a resident of KS and a non-resident of MO.   However, I'm not sure what my next step is, do I write the Kansas Department of Revenue back and tell them the reason for the discrepancies is due to the fact I was working in MO?  Also is it recommended to pay the amount they say I owe to stop the interest and penalties?  Any guidance is greatly appreciated.  

[TomD8]

@ruru1999  You should send them the forms they're requesting.

To check the accuracy of the withholding you actually reported in 2017, look at Line 21 of your 2017 Kansas tax return, Form K-40.  The amount on Line 21 should equal the total amounts listed for KS on line 17 of your W-2's and line 12 of your 1099-R's.

KS appears to be telling you that the amounts do not match.  

[ruru1999]

Thanks Tom for the advice,

You were able to point me in the right direction.  The discrepancy was found on the K-40 form for Kansas line 13 "Credit for taxes paid to other states"  it was at $0.  After amending my KS taxes they now owe me as I did not  receive my credit in 2017.  So I guess i'm grateful for their assessment.  

Thanks again,

[faajaa40]

@DanielV01  We moved from Missouri to Kansas mid-year 2018. We completed our federal return first. Next we tackled our MO return and the move to KS was documented appropriately and we filled out the MO-NRI which had our MO income percentages set accordingly due to the move. The result was a sizable refund. We then filed the KS return and received a small refund. Note: We are both residents of Kansas but work in MO (both companies are MO based). Several months after filing with the state of MO they automatically adjusted our income percentages to 100% saying that we owed. A turbo tax rep confirms that our income percentages should be in line with the date that we moved, however, MO still says it should be 100%. Who's right here?

[TomD8]

MO can tax all the income you earn by working in MO, regardless of whether or not you are an MO resident.  So if and your spouse both worked all year in MO, 100% of your income would be taxable by MO - including the portion you earned after moving to KS.

The income you earned after moving to KS would also be taxable by KS, but you'd be able to take a credit on your KS return for the taxes paid to MO on that portion of your income.  This prevents double taxation.

[AmyC]

Earning money in MO means that MO will tax all income earned there, residency is not a factor. KS will give you a credit for the time you were a resident of KS.

Kansas residency means that all income goes onto your KS return and you then receive a credit for the MO income. Mo says

...a Kansas resident you may claim this credit if: 1) your KAGI (line 3) includes income earned in the other state(s); and 2) you were required to pay income tax to the other state(s) on that income. Important—Your credit is NOT the amount of tax withheld in the other state(s); it is determined from the “Worksheet for Residents”

Please see full details for filing KS by clicking on the blue words. 

Please see MO FAQ by clicking on the blue words. It has both non-resident and part year resident information.

@faajaa40 and great response by @TomD8

[SteamTrain]

@faajaa40 

Since both of your jobs remained in MO, both before and after the move,  I suspect that your error on the 2018 NRI tax return, was that you apportioned less than 100% of just your "job wages" to MO.  Certainly, all of your other income types (Interest, dividends, investment income from stocks or mutual funds...other non-W-2 stuff), those would be apportioned as some $$ amount less than 100% according to exactly when you moved, but since your job wages were all done by you both physically working in MO, even after the move, then all of your "wage" income should have been allocated as MO-nonresident income.   

[packheavy]

@AmyC  I have a job offer in KS, but I rather live in Missouri. So basically you’re saying that Missouri would give me a credit for whatever tax I pay in Kansas? For example if I owed $2500 to Kansas but only $2000 in Missouri, after I pay the $2500, the $2000 would go to $0 after being credited. 

[KrisD15]

It means you are not double taxed on the same income. 

If you pay tax to KS on 40,000 W-2 Earned Income,when Missouri computes the Missouri tax, they will subtract what you already paid to Kansas. 

Kansas has a slightly higher tax rate, so you would most probably not owe Missouri tax on that income.

[packheavy]

How would I go about filing Kansas State taxes within the Turbo Tax App? @KrisD15 

[AmyC]

@packheavy KS needs to be prepared first in the program. 

Your resident state taxes all income but gives a credit for income taxed by another state.  Please carefully follow these directions.

You will need to prepare the states in a special order. You may need to delete both states and begin again.

1. First, prepare your non-resident KS return. This creates your tax liability for the non-resident state. How do I file a nonresident state return?
2. THEN prepare your resident state MO return and it will generate a credit for your income already being taxed in the non-resident state.
3. The credit will be the lower of the state tax liabilities on the same income. You may owe your resident state.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

[girigiri]

I work in Missouri and live in Kansas. I know I can get adjustment for taxes paid to Missouri while filing taxes for Kansas. But, can I include in that credit amount, the tax paid to the city of Kansas City, Missouri which is deducted directly from my pay check?