Kentucky Form 740-NP-R is a special Kentucky income tax return used by certain full-year nonresidents who lived in a reciprocal state and had only Kentucky wages, salaries, or other qualifying compensation covered by a reciprocity agreement. The main purpose of this form is to let an eligible nonresident request a refund of Kentucky income tax that was withheld from pay during the year even though that income is generally taxable only by the taxpayer’s home state. In practical terms, this form is not the standard Kentucky nonresident return for everyone with Kentucky income. It is a simplified refund form for people who meet the reciprocal state rules for the entire year. To use it, the taxpayer must have been a nonresident of Kentucky for the full year, must have had only the type of Kentucky income covered by reciprocity, and must satisfy the special question for Virginia residents if applicable. If those conditions are not met, the taxpayer generally cannot use this form and must instead file the regular Kentucky nonresident return. This form also allows the taxpayer to make voluntary fund contributions, which will reduce the refund amount. Because it is designed for a narrow category of taxpayers, it is very important to confirm eligibility before entering the refund amount.
Who Can File Form 740-NP-R
This form is intended for a taxpayer who was a full-year nonresident of Kentucky and whose only Kentucky income came from wages, salaries, commissions, or personal service income that qualifies under Kentucky’s reciprocal agreements with certain states. The reciprocal states listed on the form are Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin. Virginia residents must also meet the daily commuting requirement to use this form. If you had other Kentucky income, such as gambling winnings or pass-through income reported on a Schedule K-1, this form is generally not the correct one.
How To File Form 740-NP-R
First, determine whether you qualify by answering Questions A through C. If you answer No to any required statement, do not use this form. Instead, file the appropriate Kentucky nonresident return. If you do qualify, enter your identifying information, complete Lines 1 through 4, sign the return, and include the required attachments. You should attach Schedule KW-2 and a copy of the income tax return you filed with your state of residence. If both spouses qualify because each earned only Kentucky wages while living in a reciprocal state, each spouse must file a separate Form 740-NP-R. Do not combine both spouses on one form. Mail the completed return to the Kentucky Department of Revenue at the address shown on the form.
Before You Start
Before completing the numbered lines, fill in the top section of the return carefully. Use only the taxpayer’s name, not the spouse’s name, because this form is filed separately for each qualifying spouse. Enter your Social Security number, full mailing address, city, state, and ZIP code. After that, answer the three qualification questions.
Qualification Questions
These questions decide whether you can use Form 740-NP-R at all. Read them carefully before moving to the numbered lines.
Question A: Check Yes if you were not a Kentucky resident at any time during the entire tax year. Check No if you lived in Kentucky for any part of the year. To use this form, you must be a full-year nonresident.
Question B: Check Yes if your only Kentucky income for the year was from wages, salaries, or other qualifying compensation earned while you were a resident of one of the reciprocal states listed. Then check the box or boxes for the state that applies to you, Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin. If you had any other type of Kentucky income, check No.
Question C: This question applies only if you were a Virginia resident. Check Yes if you traveled daily to a Kentucky workplace. Check No if you did not commute daily. Virginia residents must satisfy this commuting condition to use the form.
If you answer No to any required qualification question, stop here and file the regular Kentucky nonresident return instead of Form 740-NP-R.
How to Complete Kentucky Form 740-NP-R
Line 1: Enter the total Kentucky income tax withheld from your wages as shown on Schedule KW-2. Include only Kentucky state income tax withheld. Do not include any local withholding on this line.
Line 2a: Enter the amount, if any, that you want to contribute to the Nature and Wildlife Fund. If you do not want to contribute, enter zero or leave it blank if allowed by your preparation method.
Line 2b: Enter the amount, if any, that you want to contribute to the Child Victims’ Trust Fund.
Line 2c: Enter the amount, if any, that you want to contribute to the Veterans’ Program Trust Fund.
Line 2d: Enter the amount, if any, that you want to contribute to the Breast Cancer Research and Education Trust Fund.
Line 2e: Enter the amount, if any, that you want to contribute to the Farms to Food Banks Trust Fund.
Line 2f: Enter the amount, if any, that you want to contribute to the Local History Trust Fund.
Line 2g: Enter the amount, if any, that you want to contribute to Special Olympics Kentucky.
Line 2h: Enter the amount, if any, that you want to contribute to the Pediatric Cancer Research Trust Fund.
Line 2i: Enter the amount, if any, that you want to contribute to the Rape Crisis Center Trust Fund.
Line 2j: Enter the amount, if any, that you want to contribute to the Court Appointed Special Advocate Trust Fund.
Line 2k: Enter the amount, if any, that you want to contribute to the YMCA Youth Association Fund.
Line 3: Add together all of your fund contributions from Lines 2a through 2k and enter the total here. This is the total amount you are choosing to donate from your refund.
Line 4: Subtract Line 3 from Line 1 and enter the result. This is the amount of your Kentucky refund. If you made no fund contributions, your refund should generally equal the Kentucky tax withheld shown on Line 1.
Signature Section
After completing the numbered lines, finish the signature section at the bottom of the form.
Your Signature: Sign your name here. Your signature confirms that you reviewed the return and that it is true, correct, and complete to the best of your knowledge.
Driver’s License/State Issued ID No.: Enter your driver’s license number or your state-issued identification number.
Date Signed: Enter the date you signed the return.
Telephone Number (Daytime): Enter a daytime phone number where you can be reached if there is a question about the return.
Preparer Section
Complete this section only if someone other than the taxpayer prepared the return.
Typed Or Printed Name Of Preparer Other Than Taxpayer: Enter the preparer’s full name.
I.D. Number Of Preparer: Enter the preparer’s identification number, if applicable.
Date Signed: Enter the date the preparer signed the return.
May The DOR Discuss This Return With This Preparer?: Check Yes if you authorize the Department of Revenue to discuss the return with the preparer. Check No if you do not want that authorization to apply.
What To Attach
To support the refund claim, include Schedule KW-2 showing Kentucky withholding and attach a copy of the tax return you filed with your state of residence. These attachments help show that you are filing as a resident of a reciprocal state and claiming a refund of Kentucky withholding.
Reciprocal State Rules To Keep In Mind
Kentucky’s reciprocity rules apply only to specific states and only to qualifying types of income. Illinois and West Virginia residents generally qualify for wages and salaries. Indiana residents may qualify for wages, salaries, and commissions. Michigan and Wisconsin residents may qualify for personal service income, including wages and salaries. Ohio residents may qualify for wages and salaries. Virginia residents may qualify only if they commuted daily to a Kentucky job. If you spent more than 183 days living in Kentucky during the year, reciprocity generally does not apply. Also, gambling income and distributive share income are not exempt under these agreements, so taxpayers with that kind of Kentucky income generally must file a full nonresident return instead.
How To Avoid Common Mistakes
Make sure you are truly a full-year nonresident before using this form. Do not include your spouse’s name on the same return, even if you are married, unless the form specifically calls for it, because each qualifying spouse files separately. Do not report local tax withheld on Line 1. Be careful with the qualification questions, especially the Virginia daily commuting question. If you choose to make fund contributions, remember that they reduce your refund. Finally, always include the required withholding schedule and a copy of your resident state return so the refund claim is properly supported.
Final Thoughts
Kentucky Form 740-NP-R is a useful refund form for certain nonresidents from reciprocal states who had only qualifying Kentucky wage income and had Kentucky tax withheld. If you answer the qualification questions carefully, complete each line accurately, include the proper attachments, and sign the return, the form gives you a straightforward way to recover Kentucky withholding that should not have been paid under reciprocity rules.