Multi-state and nonresident returns have rules that can scare the average taxpayer. Most think that living and working in different states, and consequently having to file in several states, creates a difficult situation. However, that cannot be further from the truth. Sometimes, multi-state returns are commonplace. For example, employees working in firms located in Kansas City, MO frequently live in the State of Kansas and commute daily for work. This situation is so frequent that the two states have agreements between their departments of revenue. The same can be found in the Chicagoland area in the Midwest (IL, IN, WI). Many are confused by this, but the basic mechanics are very simple. I will give an example to illustrate:
You get your W2 from your employer in MO and you are sitting at your primary residence in Overland Park, KS. You notice that state taxes have been withheld for the state of MO on your W2. But as a resident of KS, you expect to also pay KS tax. Does this mean you are getting taxed twice?
Not necessarily. Your KS state K-40 income tax return will have a line for credit paid to other states. This is where you insert the amount of taxes you owe on your MO return. So, to summarize:
- Complete your federal 1040 return
- Complete your MO-1040
- Take the dollar amount of state taxes that you are liable for from line 41 of yoru MO-1040 return and use that amount to credit your taxes in line 13 of your KS State K-40.
Here are some pictures:
This is where you are finding the taxes to pay to MO:
You insert that number as a credit on your KS return in line 13:
Many also have a question: “Do Kansas and Missouri have tax reciprocity?”
The short answer is no, there is no tax reciprocity between the two states. However, they do have provisions to honor credits paid to other states, which helps prevent double taxation.
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