My military pay should be exempt from state taxes, but it has me owing a good amount to the state.
Early in the Illinois state interview, if you indicated that you were military (active duty, reserve, National Guardsman) in your My Info (Personal Info in the CD/download software), you will see a screen like this:
Military Pay Exclusion
You have reported $XXX.XX in active duty military pay for yourself and for [spouse] on your federal return. If you need to change the wages listed, you'll need to edit your wages on your federal return.
You can adjust this amount to also include Reserve and National Guard pay, if applicable.
Be sure to include your National Guard pay here so that it can be subtracted from your Illinois state income.
"Tells me that it does not apply to my tax situation."
Where is it telling you this? In the Illinois interview? In the State Review? IN the Federal Review?
If you got this on the screen above in the Illinois interview, are you sure that you indicated that you were military in the My Info/Personal Info section?