Do I have to pay both Indiana and Illinois taxes on the income I earned working in Illinois before moving Illinois?

[jimwyso]

I have always worked in Illinois and lived in Indiana. I was able to claim taxes I paid on my Illinois nonresident form on my Indiana resident form. This is my first year moving to Illinois and filing a part time resident form on both states. However, when I try to fill out the tax credit section of the Indiana form is say I need to get that number from Illinois's non-resident form, which I do not have because I am a part year resident.  Do I have to pay double tax on this income?

[DianeW]

No, you do not have to pay double.  You may need to use your pay stubs to enter the appropriate state wages for each state for the residency period, in the W2 entry in the federal part of your return.  This is the easiest way to accomplish the accurate part year state returns. This will eliminate the need for a "credit for taxes paid to another state", which should not apply in your situation.

• In the Federal interview search for W2 > Jump to W2
• Scroll to the State Wages and enter the correct state wages earned for both Indiana & Illinois
• DO NOT change the state withholding as it appears on the W2.  Enter the state withholding for each state exactly as it appears on the W2.

[jimwyso]

Dianne,
Thank you for the quick reply, but I am having a little trouble understanding.

The W2 does have it broken down already of how much income was taxable for Illinois and Indiana. 100% of the income was taxable to Illinois and state tax was taken out of payroll through the year.  It shows about 60% of that was taxable to Indiana because of my residency during that timeframe.  

Normally I could claim a credit from Indiana based on the taxes I paid Illinois through the year. But I always received that number from the nonresident form I filled out for Illinois.

[DianeW]

@jimwyso  It is not all taxable to IL because you did not live there all year.  You can change the amount for Illinois based on the residency period by using your pay stubs.  Illinois should tax only the earnings during the residency period, not the whole year. Credit for taxes paid to another state does not apply when you actually lived in two states.

[jimwyso]

I did work in IL throughout the entire year. So you are basically saying that I could only claim the taxes I paid to IL while working in IL and Living in IN if I was a full year IN resident?

 So essentially since I am unable to claim a credit, I get double taxed by having to pay both states on the money I earned while working in IL and living in IN. Then just pay IL for the Money earned later on?

[DianeW]

@jimwyso All money withheld in IL should be refunded to you because there should be zero taxable income in IL. You did not live or work in the state of IL, but instead was a full year resident of IN. None of the money is taxed in IL and all of the income is taxed to IN, so there is no double taxation.
You may have a balance due in IN because the employer paid some tax to IL in error.