You don't have to delete the Inidana return, but you need to change the KY return. Go back to the beginning of the KY return, and select the option Nonresident Reciprocal Return (which is the KY 740-NPR return), instead of the nonresident return.
You may want to check additional entries in the Indiana return, because if you paid local tax to KY (box 19 of the KY state tax line), you may claim this as a credit against Indiana local tax you must pay (which is reconciled on the Indiana state return). Please note the following instructions:
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Make sure on the W2 screen (on the Federal side of the return) that the local tax information in boxes 18-20 is associated with Kentucky.
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Make sure (on the Indiana return) you fill out the correct residency information, including your count of residency and Out of state, Kentucky as your county of employment.
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After several screens, you will come to a screen titled: Take a look at Indiana credits and taxes.
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Under the subheading Personal, home, and family credits, click the Start box for Credit for Non-Indiana Local Taxes.
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Click Yes on the next screen.
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Fill in the appropriate information from your W-2 on the next screen entitled Credit for Non-Indiana Local Taxes.
You will then be credited for the amount you might have paid to the Kentucky locality up to the amount you are taxed in your Indiana county on this same income.
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