Remote workers whose companies are based in in seven states will incur a tax liability n their state of residence as well as in the state in which their company is located due to convenience rules. These include Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania.
Illinois (IL) is not one of the states who impose this tax for remote employees. This means that you should receive a full refund from IL. Because they do not tax your earnings as a nonresident of IL, you cannot take a credit for taxes paid to another state on the Arkansas (AR) return.
- Remove the credit for taxed paid to another state on your resident AR return.
- Review your IL return to be sure you are getting a full refund
- Contact your employer to request they stop IL withholding immediately as indicated by our awesome Tax Expert @HelenC12.
- There is still time to stop this for 2022 so that this situation will not occur again next year.
IL Filing Requirements for Nonresidents:
a nonresident, you must file Form IL-1040 and Schedule NR if:
- you earned enough taxable income from Illinois sources to have a tax liability ( i.e., your Illinois base income from Schedule NR, Step 5, Line 46, is greater than your Illinois exemption allowance on Schedule NR, Step 5, Line 50), or
- you want a refund of any Illinois Income Tax withheld in error. You must attach a letter of explanation from your employer.
- Be sure to get a copy of a letter from your employer just in case you need it later.
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