Illinois Department of Employment Security only allows Illinois state tax to be withheld from Unemployment payments. See Information Sheet for Income Tax Withholding Option
If you received Illinois Unemployment benefits but lived in Iowa, you must file an Illinois Nonresident tax return. The tax withheld with be used to pay the IL taxes or you can get it refunded. If you must pay IL tax on your unemployment in Illinois, you will get a credit on your Iowa tax return.
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