Everything gets reported on his IL state return. His resident state taxes all income from all sources. He will also file a non-resident NC return for only the work study W2 income.
He should complete the NC non-resident return first and take note of the income taxed and the tax imposed by NC on that income. Those amounts will be used to then claim a credit on his IL return for taxes paid to another state to mitigate the double taxation.
You will find the credit for taxes paid to another state in the credits section in the IL interview.
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