@achall , generally IRS recognizes the source of income as where the work is performed. Thus :
(a) if the work you perform for an entity in IL, with a Tax Home in say Germany, then the income is foreign sourced ( Germany ) for US purposes.
(b) Many states tax you on world income while a resident of that state. Therefore and when I was an Expat in Germany, many of my colleagues moved their residency , prior to moving to Texas or similar states with NO income tax -- just a driver's license and a PO Box. Different states deal with this situation differently.
(c) Please see the following information ( including Pub 54 ) for Expats :
U.S. citizens and resident aliens abroad | Internal Revenue Service (irs.gov)
Is there more I can do for you ?
