How can we do a married filing joint Kansas return as "non-residents" when my spouse has been in KS for the entire year?

[yoonyr]

My wife is living and working in Kansas, and I am living and working in Michigan. We filed a married filing joint federal return. As to the state return, Kansas requires us to file a married filing joint Kansas return and file as "non-residents" of Kansas. In this case, do we have to change my wife's resident state to Michigan (in the section of personal info) even though she has never been in Michigan?  In that case, do we have to report all of her income from KS as the income from MI? 

[DanielV01 · Accepted solution]

It depends.  In reality, these two states take the same situation, and treat them virtually the same way, but it doesn't seem so when you read the state explanation of each.  But, here is how you file:

Kansas.  As you state, Kansas requires you to file a joint return, using the nonresident status (even though your wife is a resident).  They do this so that only your wife's income is actually taxed in Kansas.  Your income is excluded in Kansas.  A nonresident of Kansas does not pay income tax in Kansas if their income was not earned there.  By treating her as a nonresident, her income earned in Kansas is taxed, but yours is not.

Michigan.  Michigan also requires you to file as Married Filing Joint.  However,  Michigan requires you to file a resident return, although they also require that the nonresident form be filled out (TurboTax will do this automatically) for the spouse that does not live in Michigan.  While that income is factored in to determine the total Michigan tax, a credit is given against this nonresident income so that it is not taxed in Michigan.

Yes, that can sound a bit confusing, but the end result is the same:  Kansas in essence only taxes your wife's income, and Michigan only taxes your income.  Neither need you to file the form or schedule to have credits for taxes paid to other states because neither is taxing the other state's income.

[yoonyr]

Thank you so much for your reply. May I ask additional question? Then, In this case, do we have to change my wife's resident state to Michigan (in the section of personal info) although she has never been in the Michigan?

[DanielV01]

No.  You will keep your residency as Michigan, and hers as Kansas.  TurboTax will straighten out the rest.

[yoonyr]

Then, I understand that, in filing MI state tax, what we have to do is just report the income and earning of my wife as those from KS. Then, TurboTax will do the rest. Am I right?

[DanielV01]

It should, yes.  If you have marked her residency as Kansas and the income as Kansas, the program should take care of the rest.  If you suspect it didn't, then feel free to comment further.

[yoonyr]

Additional question: In the section of Michigan Capital Gains and Losses, it says that "On your federal return, you reported a net capital gain of $a...Were any of your capital gains and losses from Michigan property?" Here, if all of $a is from my wife's investment, is it right to report $0 as capital gains and losses from MI property, even when we file a joint resident return?

[DanielV01]

Correct, if the capital gains were not generated in Michigan.  If they are your wife's stock sales, for example, this is not Michigan income.