My employer paid income tax to a state I did not live in. How do I report full refund from no-resident state to resident state?

[MarilynG1]

Depending on your income, it's possible to not get all your tax paid to Illinois refunded to you as a Non-Resident. Wages earned in Illinois are taxed by Illinois regardless of your residency. 

If you had the same situation last year, compare your returns. Also check your W-2 entry.  You may have entered the wrong amount of income/tax paid.

Click this link for detailed info on How to File a Non-Resident State Return. 

[TomD8]

@Patty13 --  If you never lived in or physically worked in Illinois, your work income is not subject to Illinois taxation.  Submit a non-resident Illinois tax return, allocating zero income to Illinois, in order to receive a refund of the incorrectly withheld Illinois taxes.

A few states tax non-resident remote workers, but Illinois is not one of them.  Advise your employer to cease withholding Illinois taxes.

[ecannan11]

2017 and 2018 I lived in NJ but worked in NYC. My wife and I filed both Federal and NJ taxes, but completely over looked the non-resident form for NY. The only income earned in NY was for me. My wife worked in NJ. We unfortunately received a bill from NY for 2017. It looks like they completed a substitute form. I purchased 2017 and 2018 turbo tax software, completed the IT-203 Non-Resident forms for both years and sent them to NY. They now show them on file.

Is there anything else I need to do? I believe it will take 6+ weeks to review.

[JohnW152]

@ecannan11

It sounds like you’ve done all you need to do. 

If there are any issues with you returns, the taxing authority will contact you.

[ecannan11]

Thank you. I amended the Federal and State because I thought I may have needed to. I hope it doesn't affect anything. Those were accepted and completed.

[MarilynG1]

@ecannan11 If you paid tax on your wages to a state you didn't live in, click this link for instructions on How to File a Non-Resident State Return.

In your Resident State (where you report all your income), you should get credit for the taxes you paid to the other state.

[ecannan11]

One other question. I received an assessment bill from NY for 2017 for a crazy amount including interest and penalties. I believe they completed a substitute form because I never filed NY. Now that I have sent in the IT-203 for each year will this amount be revised? Typically I receive a refund from NY. Not expecting anything because I am late filing, but also don't believe I should owing anything excessive.

[LenaH]

It depends. There will be a penalty for filing late since you did not have a valid extension of time to file.

The penalty charge is:

• 5% of the tax due for each month (or part of a month) the return is late, up to a maximum of 25%
• If your return is more than 60 days late, your minimum penalty is the lesser of $100 or the total amount due on the return

If you do not pay your tax when due, NYS will charge you a penalty in addition to interest. The penalty may be waived if you can show reasonable cause for paying late.

The penalty charge is:

• 0.5% of the unpaid amount for each month (or part of a month) it is not paid, up to a maximum of 25%

It is recommended to go to the NYS Penalty and Interest Calculator to calculate the approximate amount you may be liable for. 

Interest and Penalties

@ecannan11

[ecannan11]

There would have been no tax owed when due. If I would have filed the non-resident on time I would have received a refund. So how do they penalize money not owed?

[ThomasM125]

@ecannan11 There is a minimum penalty for late filing of a return in New York of the lesser of $100 or the tax due on the return, so if you don't have any tax, you should not receive a penalty.

[ecannan11]

Typically for as long as I have been filing to NY, I receive a refund. So in that case I would forfeit the refund and owe $0, correct?

[BillM223]

"Generally" the refund and any penalties and interest are calculated separately, that is, they tend to send you the refund and bill you separately for the penalties and interest.

But this can vary.

Have you received a letter from the state of New York for penalties and interest for 2017 and 2018 (I assume you have). Then that office (and agent, if one is named) has control of your audit experience (this is a "letter audit", not a big in-person audit).

You say that you have sent in your 2017 and 2018 returns, right? Then the thing to do is to respond to the author (office or agent) of the letter asking for the  penalty and interest, tell them that you have filed both returns, apologize for the confusion, and ask for an abatement of any penalty and interest on those returns.

They probably won't abate (wipe out) the penalty, but you want them to realize that you didn't owe any interest after all, so that they mark your account as owing no interest and therefore won't send you any more letters once you have paid the penalty.

You want them to put this matter to rest so you can get on with things and not have to worry about tomorrow's mail.

[ecannan11]

Do I send a letter or also include an 843? Or is an 843 not relevant in this case?

[BillM223]

Form 843 is an IRS form. In New York, it is the form used by the DMV to transfer ownership of a motor vehicle when the owner is deceased.

No, just ask for the abatement in the letter.

[ecannan11]

So here's the complete picture. I successfully filed my Federal and NJ State taxes for 2017 and 2018. They were accepted. I received a federal refund but owed a chunk to NJ both years. The mistake was not filing the NY non-resident forms for my income. Fast-forward and I receive an assessment bill from NY for 2017. I purchased 2017 and 2018 software immediately and mailed in the non-residents forms for 2017 and 2018. They are now filed in the NY Dept of taxation and finance.

I sent in an informal protest with the non-resident documents. 

What do you I do now? Do I wait? Do I need representation? The bill goes up $7 each day. It's a very large bill and I don't want to pay right now. 

Will they investigate and revise what is owed or they just don't care and will force me to pay what I really don't owe?