I currently live in Texas but I am considering a full-time work-from-home position with a company from Illinois. Will I have to file Illinois state income tax?

[james8]

Whether or not I am required to pay Illinois state income tax will have a significant impact on choosing to take this job or not. 

I may be required to travel to Illinois perhaps a few days every six months. Will that income be taxable or require an Illinois state income tax to be filed? 

[TaxGuyBill]

I don't know specifically about Illinois, but as a general rule, you pay taxes (1) in your home state and (2) in the States that you actually perform work in.  If Illinois follows that 'common' rule, you would only pay tax on the income that earned while physically in Illinois.

However, you may want to discuss with the HR department how they will be handling it.

[TomD8 · Accepted solution]

It's total legalese, but here is the actual Illinois statute regarding non-resident income taxable by Illinois:

Compensation is paid in this State if:
            (i) The individual's service is performed      

entirely within this State;

            (ii) The individual's service is performed both        

within and without this State, but the service performed without this State is incidental to the individual's service performed within this State; or

            (iii) Some of the service is performed within        

this State and either the base of operations, or if there is no base of operations, the place from which the service is directed or controlled is within this State, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this State.

http://ilga.gov/legislation/ilcs/ilcs4.asp?DocName=003500050HArt%2E+3&ActID=577&ChapterID=8&SeqStart...

Bottom line: Illinois can only tax income you earn by performing services within Illinois.  So technically they could tax any income you earn on your trips to Illinois.  But, as TaxGuyBill stated, as a Texas resident Illinois cannot tax you on your earnings from physically working in Texas.

[james8]

Thanks @TomD8

[Anonymous]

According to the Illinois DOR:

As a nonresident, you must file Form IL-1040 and Schedule NR if

• you earned enough taxable income from Illinois sources to have a tax liability (i.e., your Illinois base income from Schedule NR, Step 5, Line 46, is greater than your Illinois exemption allowance on Schedule NR, Step 5, Line 50), or
• you want a refund of any Illinois Income Tax withheld in error. You must attach a letter of explanation from your employer.

http://www.revenue.state.il.us/Individuals/FilingRequirements/

If your business trips are for a "a temporary or transitory purpose," you are still considered a nonresident.

[Anonymous]

From the Schedule NR instructions:  If you were not a resident of Iowa, Kentucky, Michigan, or Wisconsin, you must attach a statement from your employer, on company letterhead, indicating that your wages were not earned in Illinois and Illinois tax was withheld in error.

It appears your employer should not withhold taxes for the income earned while in Texas.