Multiple State DE & IL

[RGH68]

Hi,

I am a DE resident (home, license, etc.) but worked in IL until end of March and worked from home in DE because of COVID.  I had an apartment in IL for convenience, but ended my lease at the end of May as I continued to work from home for the rest of the year.  I notified my employer that I no longer rent in Il and to switch my state withholding to DE.  It took my employer until the end of September to make the change.

1. In turbotax, I am asked when I started living in DE and that was flagged when entered 1/1/20 as I stated that I had lived in IL, what date should I enter?   How should I answer when asked If I lived in another state?

2. When I divide my income what do I base that on: a) March 31, B) end of May when I ended my lease or c) when the withholding change in my paystub which is essentially October 1?

3. If October 31, that means I am not a DE resident which I am and what state is my residency based on?

Thank you

[DavidD66 · Accepted solution]

Based on what you have stated, you were a Delaware resident all year, even though you worked temporarily in Illinois.  Working temporarily in another state (even if you rent an apartment) does not make you a resident of that state (just like staying in a hotel for a week while traveling to another state doesn't make you a resident of that state).  Neither does tax withholding determine state of residence or how the associated income is taxed.  As a Delaware resident, 100% of your income, regardless of  what state you earned it in, is taxable by Delaware.  Since you worked in Illinois, they tax the income you earned there.  To keep from being double taxed, Delaware will give you a tax credit for the tax you pay to Illinois.  I suggest you delete and re-add both of your state tax returns, and start them over.  You should prepare your Illinois Non-Resident state first.  When asked if you lived in another state, answer no.

[RGH68]

Thank You for your explanation.

So do I base the portion of taxable income earned in IL as in W2?

[JotikaT2]

Yes, report your wages in the federal interview section as reported on your W-2 form.

Illinois filing requirements

To ensure your return is calculated correctly, you will need to confirm a few items: 

In the My Info section of TurboTax, confirm that you have entered the correct state information: 

1. Click Edit to the right of your name 
2. Confirm your input under #2 Tell us the state(s) you lived in
3. Go back to the personal information section, and verify the mailing address and "Other state income" section.  Be sure to answer yes to the question asking "Did you make money in any other states?" and reflect Illinois here. 

Please note the following as it will affect the calculations: 

Make sure you prepare the Nonresident Illinois state tax returns first.   Be sure to answer the questions correctly to ensure only income sourced to that state specifically are reported.

Once you have entered all of the nonresident state information, then start your Delaware resident state tax return.  This will ensure you receive any credits for taxes on income which may have been taxed in Illinois. 

Proceed through the screens in your Delaware return until you see credits and taxes. You should see a section saying taxes paid to another state under the credit for taxes paid.   You can edit your information here if needed but the taxes paid to the other state should be listed in this section.

[RGH68]

Thank you