Other State Credit for Part-Year Resident

[zinaarana]

Client was part-year Kansas resident who worked in Missouri and part year Colorado resident. For the part year they were Kansas resident, the source of their income is in MO. However I can't figure out how to give them that credit in Kansas since it's not the state of residence at the end of the year. Any ideas?

[George4Tacks]

From https://www.ksrevenue.org/faqs-taxii.html

What if I am a resident of another state with income from Kansas?

You are required to file a Kansas income tax return. File as a nonresident and complete Kansas Schedule S, Part B.

Go to the form (KS Sch S) and look over part B. Click on the lines that need to be completed and it (hopefully) will take you to the right entry area. 

Support MIGHT be able to help you unfold this. 

[zinaarana]

thanks! I have read the Kansas website and I am almost confident on how it's supposed to look. I can't figure out how to input in Proconnect. I will try support for that. The only doubt I still have is that the Kansas Sch S only asks for total income and Kansas sourced income. Technically, no income is sourced in Kansas.

[PhoebeRoberts]

The MO wages during the period of residency is considered KS-source income ("any items of income, gain or loss, or deduction received while a Kansas resident (whether or not items were from Kansas sources)") per page 18 of the KS instructions. You use the worksheet on page 8 to calculate the credit for taxes paid to other states for part-year residents.

Lacerte will not compute the KS other state tax credit when the taxpayer isn't a full-year KS resident, so I think ProConnect won't, either. I think you have to do the calculation manually and make entries in the Other State Tax Credit section under State & Local. (In Lacerte, that's Screen 52.061, but ProConnect doesn't have handy screen numbers like that.)

[itonewbie · Accepted solution]

MO will have the primary right to tax the wages sourced to MO but paid to your client during the KS residency period.  Since this is a multi-state return, PTO wouldn't be able to figure out which income is sourced to and double-taxed to which state and how much tax was paid on it.  This will call for you to run some manual computations and enter at least the following under State & Local > Other State Tax Credit > KS Other State Tax Credit:

1. State abbreviation: This will be MO in your case;
2. Income tax liability in other state [Override]: This is the total liability on the MO return, which PTO will prorate for the amount assessed on the income subject to double taxation by KS and MO, where applicable;
3. Other state's adjusted source income [Override]: This is the MO equivalence of KS AGI on the MO return, which PTO will use, in part, to compute the effective tax rate on the MO return and, thereby, the limitations for other state tax credit based on MO tax assessed on the income subject to double taxation by KS and MO; and
4. Income earned in other state while Kansas resident (PY only): This is the amount of wages earned in MO during KS residency in your case.  PTO will use this piece of data to compute the KS tax assessed on this income and limit the credit to the lower of this or MO tax assessed on the same income.

Once that's done, double check the computation on the statement of K-40 to make sure the numbers make sense.