By federal law, retirement plan distributions are taxable only by the taxpayer's state of residence at the time the distribution is received.
https://www.law.cornell.edu/uscode/text/4/114
On your Illinois Schedule NR, Line 14 Column B should be blank.
The letter you received from Illinois should contain instructions on how to appeal.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
