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CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

I live full-time in CA but worked for several months remotely for a company in Illinois after a 3-week training period in IL. For my 2022 wages, ADP withheld state taxes for both CA and IL. Based on my research, all of the wages would be considered California income because the work was performed in CA, and none of it would be considered income from Illinois -- is that accurate?

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8 Replies
MaryK4
Expert Alumni

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

The time you were in Illinois for training was Illinois income, but if you worked remote the rest of the year, it would be California income.

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CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

Thank you for your response @MaryK4! A follow-up question for you if you don't mind... The W-2 does not differentiate the training period versus work done in CA, so the state wages (box 16) for both CA and IL include the entire 2022 wage amount. Based on what you stated, the IL state wages should only include the wages for the training period, and the CA wages would include the rest. How should I report the W-2 numbers on the state tax returns? Do I need to request a revised W-2? Thank you in advance!

MaryK4
Expert Alumni

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

You do not need a revised W2, but in TurboTax, you will file Illinois as a nonresident.  You will be able to allocate how much was Illinois income (you will have to calculate it yourself).  Then on your California resident tax return, all income is reported, but you will do the credit for taxes paid to another jurisdiction (Illinois) so you are not double taxed.

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TomD8
Level 15

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

@lizzylm wrote:  "Based on what you stated, the IL state wages should only include the wages for the training period, and the CA wages would include the rest." 

 

No.  Your IL wages are only the wages for the training period, but since you are a CA resident, ALL your wages, including what you earned in Illinois, are CA wages.  CA residents are taxed on all their income, regardless of where earned.

 

The "other state credit" you can claim on your CA return (for the taxes paid to IL) prevents double taxation.

 

In TurboTax, be sure to prepare the non-resident IL return before you do your CA return, so that the program can calculate and apply the credit.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

Thank you @TomD8.  Unfortunately I already started the California state return first... I will complete the non-resident Illinois return then go back to review the CA return again, hopefully TurboTax will be able to calculate the credit then.

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

Thank you so much @MaryK4!

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

I just noticed that Line 12 "State wages from your federal Form(s) W-2, box 16" of my CA state return is twice the amount I entered from the W-2. I assume TurboTax added CA and IL together? Is there a way to fix this? Thanks in advance!

GeorgeM777
Expert Alumni

CA resident working remotely for an IL-based company, state taxes withheld for both states on the W-2

You might check your IL return because there will be a screen that relates to income allocation.  Make sure the allocation is accurate.  Then go back and check the wage income you entered.  The CA section of TurboTax should only pull your wage information from your federal return.  

 

You may have to delete your CA information and then essentially start over with your IL return.  We see from your prior post that you did not prepare you non-resident state first.  Moving out of order could have affected the way TurboTax calculates your total wages. 

 

@lizzylm 

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