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Illinios resident with 100% wages from Kentucky

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Level 2

Client lives in Illinois, but works in Kentucky only. I'm preparing the IL-1040 and a Kentucky 740-NP-R with the KW-2. Is this correct? Also, where do you enter the Local income tax , as opposed to the state income tax withholding, to get this money back? Thank you for any help!

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4 Replies 4
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Level 2

As I endlessly go through these returns, I'm coming to the conclusion that you just don't get your local taxes back from the KY locality. This doesn't seem very "fair". This would be sad because she really needs every dime she can get.

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Level 15

Your client is allowed to claim a credit for local tax paid to a Kentucky municipality on compensation because that tax is not covered by the reciprocal agreement.

The Illinois admin code allows credit to be claimed on taxes paid to political subdivisions of a state and Sch CR instructions are clear about when it is allowed under a reciprocal agreement.

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Still an AllStar
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Level 2

In other words, fill out Step 2, Columns A-D on the Illinois Schedule CR. Thanks.

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Level 15

I think you meant Columns A and B.  You'd complete Sch CR the way you normally do and Line 51 would have just the city tax paid to the KY municipality.

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Still an AllStar