Conducting business in a different state remotely

[akkenney15]

Hello - Due to COVID 19, our small business conducted revenue generating legal services in a Illinois while never traveling to the state from Arizona, our home state.  Do we need to file a non-resident tax filing for Illinois?  All revenue was earned in Illinois but all expenses were generated in Arizona.  

Turbo Tax is only allowing me to allocate the full business net income to Illinois.  Is this correct?  Would I file a non-resident return for Illinois?

[ErnieS0]

We'd love to help you complete your tax return, but need more information. Can you please clarify your question?

I'm not understanding how you would have expenses in Arizona without any physical presence. Do you mean court fees? And why no AZ income? If you are filing or contracting attorneys in AZ it seems like you would have AZ income and expenses and would need to file a nonresident return. But we'd have know more about your situation.

[akkenney15]

Thanks for replying.  We reside in Arizona (12 month presence)  and have a full time income besides the small business income.  The small business income was generated by performing legal services conducted via email/ telephone with clients and closing agencies in Illinois. There was no traveling to Illinois to conduct the business due to Covid. 

[ThomasM125]

Business carried on within the state of Illinois would be considered Illinois sourced income and may require you to file a non-resident income tax return. You would only be required to file the return if you had a tax liability, however.

So I would suggest you complete the non-resident return for Illinois in TurboTax and if you have a tax, file the return. Otherwise, you should not file it.