How to determine IL portion of income

[jenshoe]

I moved to KY fall of 2020 (so resident of KY all of 2021). I was still getting a paycheck from my employer in IL for part of 2021. My employer was taking out both IL and KY state tax. Turbo Tax is asking what portion of the income on my W-2 is from IL. Since I didn't live in IL at all in 2021 should any of the income actually be considered from IL? Should I enter "0" in the question that asks "how much of the w-2 income did you earn while working in IL"? I am basically just trying to get back the state tax that was taken out for IL. They shouldn't have taken anything out because of reciprocity?

[AnnetteB6]

Yes, if you did not work in Illinois during 2021, then you should enter '0' as the amount of W-2 income you earned while working in Illinois.  

Even if you did work in Illinois while you were a resident of Kentucky, the reciprocal agreement between the states should allow you to get a refund of the Illinois taxes that were withheld in error.

[jenshoe]

Thank you for your response. I have another question for you. We are receiving unemployment from IL (as a KY resident). After completing my taxes (fed, IL, and KY) it seems like the unemployment is included in our KY income. We have IL state taxes taken out of each unemployment check. So do we now owe KY because the unemployment wasn't taxed in KY?

[ErnieS0]

Yes. Kentucky taxes unemployment so you owe tax on your IL unemployment. However you can claim a credit on your KY return for tax paid to IL on the unemployment.

IL and KY have a reciprocal tax agreement. An IL employer will withhold IL tax on a KY resident working in Illinois so the Kentucky resident normally does not have to file a IL return.

However this agreement does not cover unemployment so your IL unemployment is taxed by both IL and KY. This double-tax allows you to claim a credit on your KY return for IL tax paid.

1. In the Kentucky section of TurboTax, go to Credit for Tax Paid to Another State
2. Say Yes to Did you earn income in another sate in 2021?
3. Select Work on Credit on About Credit for Tax Paid to Another State
4. Say Yes to Tax Return Filed With Other State
5. If you do not see Illinois, add IL
6. On Income Earned in Illinois, you should see an amount for your unemployment. If not, enter your unemployment amount and Unemployment for Type(s) of income earned.