Live in IL but work for NY Company. Unsure about "Allocate your Illinois and non-Illinois amount", Was taxed in both IL and NY for the same income. What should non-IL be

[nperri6]

I lived in IL  and NJ for part of the year, but worked for a NY company the whole time.  The entire income was taxed in NY, and the portion while living in IL was also taxed by IL. On the "Allocate your Illinois and non-Illinois amount"  It has the wages filled in for IL but nothing in 'Non IL income'.  Should I be filling some amount in there?  I am trying to determine if I qualify for a "tax paid in other state" credit

[DanielV01 · Accepted solution]

It depends.  The question is asking how much of the income that is being reported to Illinois was actually earned in another state, in this case NY, so that the credit for taxes to another state may be calculated correctly.  For this question, if the amount reported to NY is taxable to NY, this is the information you will put in this box. 

However, there are other factors.  NY has some tricky laws when it comes to income that is taxable to NY.  Although you did not live there, you are considered as working in NY if you worked remotely from home.  In this circumstance, (which seems to be the case here) you file a NY nonresident return on all of your income, and both Illinois and NJ will give you credit for the NY income that you earned while in each state, since each taxes the amount of income you earned in NY during the same time period.

If, however, NY was not supposed to tax this income, you still file the NY nonresident return, but you will allocate the income in New York.  Your Illinois income would not be taxable in NY if you were working in an Illinois office instead of from home, and you would want to indicate that this income is not taxable.

Either way, you do wish to prepare the nonresident return first to get accurate calculations.  Here's an FAQ to assist you with this:  https://ttlc.intuit.com/replies/3302052

[edited 3/5 2017 6:03 PST]

[nperri6]

Thanks, that makes sense. What I am wondering about is that, when I don't allocate for IL I am not receiving any tax credit for the taxes that I paid in NY. When I do my NJ taxes I do.  I am wondering why the IL taxes don't offset.

[DanielV01]

You are correct.  In the Allocation screen, enter the New York income that matches your Illinois income.  This is the amount that that box is asking for.  This is the amount that you earned while an Illinois resident as a nonresident of New York, which New York is taxing.  This is how TurboTax will calculate your credit.  I am editing my answer to accurately convey this information.

[nperri6]

Thanks for help Daniel.  I just had one more clarification about that section.  If I have 30,000 total income in IL, and 29,000 of that was earned from the NY source, on that "Allocate your Illinois and non-Illinois amount", do I leave the IL amount as 30,000 and set the "non-IL" as 29,000?  When I do this, it does say I will get a tax credit, but when I go to file it says I cannot e-file because "cannot file when the sum of Illinois wages plus out of state wages on all W-2s does not equal total wages reported on IL Schedule CR".   Would I change IL wages to 1000, and the non IL to 29,000?   Or leave the IL as 30,000, and the non IL blank?  In either of those situations it doesn't give me a tax credit for IL.   Thanks again.

[DanielV01]

Leave the IL as 30,000, and the non-Illinois as 29,000.  Then, check the W-2 to see if the NY amount plus the IL amount equals box 1.  (If there is a NJ amount also from the same company, this could be causing the issue.  If this is the case, you may have to mail in the IL return because of a quirk in how these states are required to report on a W-2).  Here's an FAQ that describes the message you're seeing (You'll need to click on the link):  <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/5084858">https://ttlc.intuit.com/replies/5084858</a>

[nperri6]

Hi Daniel, Yes, the NJ is also from the same company.  My W2 has 3 states listed on it, IL, NJ, and NY.  The IL and the NJ appear to be a subset of the total earned, and the NY amount is the total. IL: 29,409.46, NJ: 33,777.21, NY 62,600.91 (which is the total in box 1) .  What is kind of strange is adding IL + NJ = 63,186.67, which is more than the total I made in the year.  I am assuming this means there is an overlapping payment period where they took tax for both states.   I am thinking that this number discrepancy might be what is causing that error message for e-filing to occur.  Thank you for all your help!

[DanielV01]

Like I said, it is a quirk between how NJ and NY reports their income, which does affect this. Part of the reason for the difference is that NJ considers 401K as taxable state income, whereas the federal does not.  No way to adjust this for Illinois; you'll need to mail it in.

For your NJ return there is another area to check.  Since you gave me exact amounts I can tell you what to put in the box.  NJ has a question on double-taxed income, which refers to your NY income you earned while living in NJ.  You will enter 33,191 (actually 33191.45, but you round down), which is the amount of NY income being taxed by NJ as well.  For the tax paid on the double-taxed income, you will either add additional NY tax due to the NY tax withheld on your W2 or subtract refund to be received, and then multiply by .5302, which is the ratio between the NJ portion and the IL portion.  This way, NJ tax is calculated correctly so you are not double-taxed by NJ either.

[nperri6]

Great, thanks again for the help!

[DanielV01]

Always a pleasure.

[anonymoustaxpayer123]

@DanielV01 Just checking the info in this thread is still correct for tax year 2020. Thinking that IL won't allow a tax credit for income taxed by another state if it was *also* IL income, so no more tax credit in this situation?

Situation: NY employer, working remotely from IL, income taxed by NY (based on employer/office location) and also by IL (based on home/place where remote work is performed).

Tried to figure this out based on the tax forms -- IL 2020 Schedule CR instructions for Column B, Line 1: "Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received. Do not include wages taxed by another state if they are also shown as Illinois wages." Wouldn't that result in the tax credit being denied?

[DanielV01]

@anonymoustaxpayer123 

Sometimes tax forms instructions use confusing wording, and that's the case here.  You qualify for the credit.  What goes into the Column B are the wages specifically reported to New York.  All of the "Illinois" wages will be included in Box 1 of your W-2 (since you live there).  These will appear in column A.  

While it is true that the amount is "included" with Illinois income, it is also taxed separately by New York, and therefore qualifies for the credit.

If you are using TurboTax, make sure you prepare the New York nonresident return first.  It should allow the program to transfer the New York figures to the Illinois return to calculate the IL credit.

[Taxpay23]

@DanielV01 

Does Illinois allow tax credit for tax paid to another state ?

My Scenario  - working from home in Illinois , company based out of New York and being taxed in NY. Full year resident of IL.

my W2 doesn’t have Illinois tax deductions.  

[Vanessa A]

Yes, Illinois allows for a credit for taxes paid to another state.  You will need to file your NY non resident return first, then file your IL return so you can get the credit on your IL return for taxes paid to NY. 

[Kamilcygan]

Not true. I just went through this. IL Department of Revenue is going to send you mail audit asking for your employer to provide days worked in each state. No employer will do that and therefore IL will not allow credit. Publication 302 exceptions. Also, there is a case that went through the IL court system in 2015 that allows for that double taxation scheme, so basically save yourself 10% in penalties and pay tax in both states…