Can I override the border state exclusion for KY income earned by VA resident?

[sjrcpa · Accepted solution]

In Screen 52 don't check the border state box.

[itonewbie]

If your client was a VA resident who commuted to KY for work, the reciprocal agreement stipulates that only VA has the right to tax the compensation.  You can't voluntarily pay tax to KY and expect a credit from VA.  A K-4 should have been filed with the employer to exempt the compensation from KY withholding.  If any KY tax was withheld, a return may need to be submitted to claim a refund.

[rbynaker]

Based on the additional information provided here:

https://accountants-community.intuit.com/questions/1839967-my-client-is-a-va-resident-with-a-busines...

I agree that your client cannot use the border state rule since the K-1 income is on Schedule E and not Schedule C.  See this ruling (but sounds like I'm preaching to the choir):

https://tax.virginia.gov/laws-rules-decisions/rulings-tax-commissioner/15-214

"Further, only earned income (wages and salaries) or business income reported on federal form Schedule C is eligible for the special rule.  See P.D. 04-125 (9/16/2004). Because it was reported on federal form Schedule E, the partnership income generated in North Carolina is not eligible for the special border state rule."

I'm assuming you have K-1 income and not a loss that may be suspended for some reason.

I don't know Lacerte though so I don't know how you would indicate not eligible.  Let me shout out to someone else who does use Lacerte and is in one of our border states.

Rick

[rbynaker]

@sjrcpa  can you help with a Lacerte question regarding the VA border state rule?

[cktrible1]

The box is not checked but the KY income earned by Virginia resident who is NOT eligible for the border state rule because he does not commute to KY (resides over 400 miles from home to KY location).  He works part time for KY company.  Not a daily commuter as envisioned by the rule.   Program won't give income to KY.

[cktrible1]

Client doesn't commute to KY for work.  Occasionally goes there for part time work as part owner of the business, but isn't eligible for border state exclusion that applies to a daily commuter only.  LAw year had to use Ultra tax to file his return.  Looks like this year may need to do the same. I called Lacerte help desk and they couldn't override the border state exclusion either.  

[qbteachmt]

Is there a reason this has been asked three times, @cktrible1 ?

There is no reason to ask more than once, and no reason to update all of the topics with the same new info.

It helps to start One Topic for the one issue, and a current tax issue would benefit from its own topic, not added to older, existing topics.

Thanks.

[itonewbie]

@cktrible1Please keep your discussion to this thread as @qbteachmt has suggested.

You mentioned that your client worked "part time" in KY.  Understand you are looking for a way to have the border state exclusion not apply.  How is the compensation reported and withheld to KY and VA, respectively, on the W-2?

[cktrible1]

It is on a standard W-2 with withholding reported to KY and nothing to VA.  He also gets a K-1 from the business with KY non-resident withholding but that works fine.  It is just the W-2 KY income that the program insists on reporting to VA.  He is 400 miles from KY business and goes there once a month or so.  Lives in Richmond, VA and is VA resident.

[cktrible1]

He gets a W-2 from the Kentucky firm with only KY withholdings for KY tax.  His KY W-2 shows his address as VA but does not withhold any VA tax.  He pays tax to KY on the KY income only.  Balance of income goes to VA.  

[lsturgill]

I am having the exact same issue and not able to get teh w-2 income to report as Kentucky wages. Someone please help.

thanks