see this article. basically, New York taxes telecommuters. so you owe tax to NY
https://www.thetaxadviser.com/issues/2010/feb/apractitionersguidetothetaxationoftelecommuting.html#:...
now the question as to a credit on the Illinois return
this comes from ILl PUB 130
https://www2.illinois.gov/rev/research/publications/pubs/Documents/pub-130.pdf
When must I withhold Illinois Income Tax from my employee’s compensation?
You must withhold Illinois Income Tax when you withhold federal income tax from compensation you paid in Illinois. Compensation
is paid in Illinois when the employee’s services are “localized” in Illinois. This statement applies to all individuals except qualifying
residents of Iowa, Kentucky, Michigan, and Wisconsin, andmilitary spouses. For further information, see “When am I not required to withhold Illinois Income Tax?”
When is compensation paid in Illinois?
The following are general rules for when compensation is paid in Illinois.
1. If the employee’s service is localized in Illinois because all of the service is performed in Illinois, then compensation is considered paid in Illinois and subject to Illinois income tax withholding.
i think this is your situation which would mean your employer is failing to properly report Illinois wages and take withholding.
this would also mean, if proper reporting was done, you would pay taxes in Illinois and New York and not be entitled to a credit for the NY taxes.
@Kamilcygan reference to a 2015 case may not be appropriate because this was a situation where the taxpayer had a physical presence in the other state and Illinois denied the tax credit because this income was sourced to another state.
these are from the instructions for column B of IL-1040-schedule-CR. note that instructions do not constitute law
https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/individual/IL-1040-Schedule-CR-I...
Column B – Non-Illinois Portion In Column B for each line, include only the portion of an amount included in Column A of that line that is non-Illinois income or deduction, as determined using Illinois’ rules for sourcing income.
Do not include any amount that is not included in Column A, or any portion of an amount that is included in Column A unless specifically
instructed to do so below or in Publication 111 (an Illinois resident for the entire tax year, follow theSchedule CR Instructions for each line to determine theamount to write in Column B).
Illinois Residents - To determine the amount to enter in Column B of each line, read and follow the specific instructions below.
Line 1: Wages, salaries, tips, etc. Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received. Do not include wages taxed by another state if they are also shown as Illinois wages. Also do not include any wages you received for working in Iowa, Kentucky, Michigan, or Wisconsin while you were an Illinois resident, unless you paid tax to a city or county on these wages.
this is where the issue comes in. your w-2 doesn't show Illinois wages but I believe under Illinois law since all the work was performed in Illinois the wages should also be shown as Illinois wages.
