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
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]
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]
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.
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.
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.
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>
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!
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.
@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?
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.
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.
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.
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…
see this article. basically, New York taxes telecommuters. so you owe tax to NY
now the question as to a credit on the Illinois return
this comes from ILl PUB 130
https://www2.illinois.gov/rev/research/publications/pubs/Documents/pub-130.pdf
When must I withhold Illinois Income Tax from my employee’s compensation?
You must withhold Illinois Income Tax when you withhold federal income tax from compensation you paid in Illinois. Compensation
is paid in Illinois when the employee’s services are “localized” in Illinois. This statement applies to all individuals except qualifying
residents of Iowa, Kentucky, Michigan, and Wisconsin, andmilitary spouses. For further information, see “When am I not required to withhold Illinois Income Tax?”
When is compensation paid in Illinois?
The following are general rules for when compensation is paid in Illinois.
1. If the employee’s service is localized in Illinois because all of the service is performed in Illinois, then compensation is considered paid in Illinois and subject to Illinois income tax withholding.
i think this is your situation which would mean your employer is failing to properly report Illinois wages and take withholding.
this would also mean, if proper reporting was done, you would pay taxes in Illinois and New York and not be entitled to a credit for the NY taxes.
@Kamilcygan reference to a 2015 case may not be appropriate because this was a situation where the taxpayer had a physical presence in the other state and Illinois denied the tax credit because this income was sourced to another state.
these are from the instructions for column B of IL-1040-schedule-CR. note that instructions do not constitute law
Column B – Non-Illinois Portion In Column B for each line, include only the portion of an amount included in Column A of that line that is non-Illinois income or deduction, as determined using Illinois’ rules for sourcing income.
Do not include any amount that is not included in Column A, or any portion of an amount that is included in Column A unless specifically
instructed to do so below or in Publication 111 (an Illinois resident for the entire tax year, follow theSchedule CR Instructions for each line to determine theamount to write in Column B).
Illinois Residents - To determine the amount to enter in Column B of each line, read and follow the specific instructions below.
Line 1: Wages, salaries, tips, etc. 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. Also do not include any wages you received for working in Iowa, Kentucky, Michigan, or Wisconsin while you were an Illinois resident, unless you paid tax to a city or county on these wages.
this is where the issue comes in. your w-2 doesn't show Illinois wages but I believe under Illinois law since all the work was performed in Illinois the wages should also be shown as Illinois wages.
@Mike9241 Is correct. Income taxed by NY would have to be also taxed using IL income definition to be eligible for credit. As NY has convenience of the employer rule and taxes based on that and IL would not tax that income using it’s rules you will be basically double taxed and not eligible for this credit. One way out of it is for the employer to create a bonafide office for you, stop NY withholding and withhold just IL taxes.
I am working for a NYC based company, and they allowed me to work remotely, so I moved to Chicago in April 2023. I've been living in Chicago ever since.
I know that NY is one of the few states that taxes remote workers. Does IL give you a credit for taxes paid via NY's convenience rule, or will I just have to pay taxes in both states?
Q. Does IL give you a credit for taxes paid via NY's convenience rule?
A. Yes. Be sure to prepare the NY non resident return first. That is needed to calculate the IL credit.
Agreed. However in the instructions for column b of Schedule CR IL-1040, you are to put the non-Illinois income “as determined using Illinois’ rules for sourcing income.” NY is unique with the convenience of the employer rule which IL doesn’t have. So following that direction, none of my wages go in column b, and at the end, I get no credit.
That is correct my friend. I went through that situation two years back. You will be double taxed. The only way around it is: you have to fit all the requirements of remote workers by NY standards, by approved by your company to be fully remote and not work a single day in NY (because if you do then your W2 will list all your income under NYS, another weird NYS requirement for W2). If you fit all of the above reqs then you do part time resident return for NYS and state how many days in a year you worked in NYS and the rest you list under IL which should match your IL W2.
Thank you for your response. So, did your NY employer ever give you a W-2? Starting from 2024 year I’ll be 100% remotely working in IL, so Id be eligible for the second option…
I will find out in a month or so once they publish my 2023 W2. Please remind me here towards end of Jan and I will let you know!
Cheers!
I will remind you. Does your company have a branch in Illinois? Is that how they’re able to offer you a IL w-2?