Q. Do I put this on my Al taxes or file a separate IL return?
A. Simple answer: both. But, you need to explain more, particularly what does "received a w-2 from IL" mean?
The general rule is: your report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state.
Taxable fringe benefits are treated as salary for taxes purposes. That's why you got a W-2. But, if you live and work in AL, IL tax should not have been withheld. You may have to file an IL return only to get a refund. The income will be taxed on your AL return, regardless of how you handle IL. If no IL was withheld, you do not need to file an IL return.
