Iowa Non-Resident Return & Illinois Resident Filing

[tito20]

I’m an Illinois resident with a W-2 taxed in Iowa (employer incorrectly put Iowa... I never worked there. Iowa is also a reciprocal state to Illinois which complicates things). I also have about $4,000 in Illinois self-employment income where tax wasn't withheld. I want to make sure TurboTax calculates my Illinois tax correctly and avoids any underpayment penalty, without overpaying (I'm currently on the screen that warns about a possible underpayment penalty).

My federal return is in good shape so I'd pay an expert to just help with the state taxes but I'm not seeing that option.

Anybody know if I should hit YES to the Department of Revenue computing my penalty assuming they realize I already paid Iowa taxes and those should count toward my Illinois taxes??

[DawnC]

Since Illinois is your resident state, you don't need to take any extra steps -  All of your income gets taxed by your resident state.   You will need to file the non-resident IA return to get your withholdings back - Apply no income to your IA return and prepare that one before you prepare your resident return.   The instructions are linked below.  

How do I file a nonresident state return?    If preparing a nonresident return solely to recover erroneous tax withholdings, enter 0 on the screen that asks for the amount of income earned in that state. This will eliminate your tax liability for that state, resulting in a full refund.

[tito20]

I appreciate the response, @DawnC!

I believe I did all of this - I didn't claim anything in Iowa. I did the IA non-resident return first and then did IL resident return. But the dropdown showing my state numbers shows $0 for IA refund and it shows I owe for IL. 

Does that mean I entered something incorrectly somewhere along the way? Thank you!

[tito20]

Also, @DawnC! Illinois and Iowa are reciprocal states. So I can't do the “Credits for taxes paid to other states” in my Illinois filing. It specifically says do not add the Iowa taxes there because it's Iowa.

[DianeW777]

Yes, your are correct. Illinois (IL) and Iowa (IA) are reciprocal states. Be sure you did select IA as the withholding state in your W-2. If so, then the IA return should show this amount as tax withheld and refunded. 

Step through each state return and be sure you did select 'Nonresident' for IA. In this scenario you will not used the 'Other state tax credit'.

@tito20