I live in Indiana and work in Illinois. I paid state taxes in Indiana and Illinois for the money I earned in Illinois. I withdrew money from my 401K last year and I paid Indiana state taxes on it. When I filed my Illinois state taxes this year, I did not claim the 401K withdrawal as money I earned in Illinois. Now Illinois contacted me and said I owe them more state taxes because my federal AGI is higher than what I paid taxes for in Illinois. The reason my AGI is higher is because of the 401K withdrawal.
Should I have to pay Illinois taxes on the 401K withdrawal even though I live in Indiana and paid Indiana taxes on it? The 401K account is through my Illinois employer. Thank you.
