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

[Mike9241]

see this article. basically, New York taxes telecommuters. so you owe tax to NY 

https://www.thetaxadviser.com/issues/2010/feb/apractitionersguidetothetaxationoftelecommuting.html#:... 

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

https://www2.illinois.gov/rev/forms/incometax/Documents/currentyear/individual/IL-1040-Schedule-CR-I... 

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. 

[Kamilcygan]

@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. 

[minivatreni]

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? 

[Hal_Al]

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. 

[minivatreni]

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. 

[Oszust]

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. 

[minivatreni]

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…

[Oszust]

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!

[minivatreni]

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? 

[minivatreni]

Hi, are you still paying double taxes? I am in a situation like this now. 

[TomD8]

Perhaps this will help:

From the instructions for Illinois Schedule CR, line 51:

Line 51 – Follow the instructions on the form. Enter the total tax
you paid to all other states (including tax paid to cities or other local
government) minus all credits allowed, except credits for payments
you actually made to the other states or payments made on your
behalf. For full-year residents, you would report 100% of the taxes
paid.
For a part-year resident, include only the tax on income earned
or received while an Illinois resident. For example, you and your
spouse moved to Illinois from Indiana at the beginning of April. You
worked in Indiana the entire year, earning $30,000 in wages evenly
throughout the year. Your spouse worked in Indiana the entire year,
earning $24,000 in wages evenly throughout the year. Of your total
wage income, $40,500 of such income was earned during the
period you were an Illinois resident. Your only source of income
taxable in Indiana is your $54,000 of wage income. You paid
$1,000 in income tax to Indiana. The amount of Indiana tax you may
include on Line 51 is determined as follows:

$1,000 × ($40,500 /$54000)= $750.

Also, you may want to review this TT thread from 2021:  The user was in a similar situation.
https://ttlc.intuit.com/community/state-taxes/discussion/i-moved-to-il-from-nyc-i-m-encountering-err....