Illinois deduction for taxes paid to another state

[cleanman2]

We had gambling winnings from Mississippi and they withheld the tax we owed. According to my research non-residents do not have to file a Mississippi tax return if they only have gambling winnings in Mississippi. When filling out the information for my Illinois return I can enter the amount withheld but when I move to the next item the amount I entered is removed from the box. When I check the finished return I do not see any credit for Mississippi tax paid. How can I get TurboTax to accept the Mississippi tax I paid as an Illinois credit?

Thanks,  Jim

[AmyC]

Follow these steps:

1. Open your return
2. Go to the federal section for deductions and credits
3. Locate Estimates and Other Taxes Paid
4. Select Other Income Taxes
5. Locate Other Income Taxes Paid in 2022
6. Select Withholding not already entered
7. Yes
8. Locate state withholdings
9. Select MS
10. Enter amount

[cleanman2]

Thank you for your quick reply, unfortunately it still is not recognizing the amount of Mississippi tax withheld.

After I click through all the questions and enter the amount and continue and then return to the Credit for taxes paid to another state line the amount still shows as $0 and the box is grey and says Revisit. Also the amount I owe to Il does not change.

I've done it 3 times now. When I go back and start your procedure again the correct amount is already entered there,but it is not carried over to the Credit for taxes paid to another state line.

When I start working through the states portion the program wants me to buy the MS state preparation option. Could that be the problem? As I said in my initial message as a non-resident of MS with only gambling winnings I don't believe I must file a MS tax return.

Regards,  Jim

[MarilynG1]

No, not using TurboTax to prepare a MS return would not cause this.

Some states don't recognize tax paid to another state unless there is an income document reporting this in your Federal return. 

Did you enter the W2-G into your Federal return, showing the Mississippi Tax Paid? 

Here's more info on Reporting Gambling Winnings. 

@cleanman2 

[cleanman2]

I went back and checked and I did enter the info on the W2G I received from Mississippi including the amount of MS tax they withheld in the income section of preparation section for the federal return.

I also listed gambling losses equal to the amount I won. This was before it was determined that taking the standard deduction was best for me. I assume TT handled that correctly.  I checked and line 8 on the fed 1040 includes my gambling winnings from all sources including MS, it is also included on Schedule 1.

[BillM223]

A few questions:

1. Are you using the Online product or the CD/download product?

2. When you say, "When filling out the information for my Illinois return I can enter the amount withheld but when I move to the next item the amount I entered is removed from the box." Where is this? In the W-2G interview or somewhere in the Illinois state interview? Please enter details (there aren't that many screens). Also, on exactly what screen is the amount in the box removed?

I have tested this on both the CD/download product and the Online product, and it works fine in both places. I have to assume that you are entering something different from me.

[cleanman2]

1. Are you using the Online product or the CD/download product?

I am using the CD, Premier version.

2. When you say, "When filling out the information for my Illinois return I can enter the amount withheld but when I move to the next item the amount I entered is removed from the box." Where is this? In the W-2G interview or somewhere in the Illinois state interview? Please enter details (there aren't that many screens). Also, on exactly what screen is the amount in the box removed?

I am on the STATE TAXES tab.

Under the sub heading "Personal, home and family credits". I am making the entry on the line titled:

"Credit for taxes paid to another state". Right now there is $0 in front of the box with the label Revisit in it. The box is colored grey. If I click on the Revisit button I am taken to a page with the title "Other States Income and Tax Summary". The MS line contains the correct income and tax amount for MS.

When I click on the Done button I a taken to a page with the header "Income from outside Illinois". This page says to Enter income from outside Illinois below. It has a table with two columns titled Total Amount and Other State Amount. There are four lines.

Taxable interest income

Ordinary dividends

Capital gains (or losses)

Other income

There are amounts filled on each line under the Total Amount heading. Under the Other State Amount heading there are blank boxes. There is a note that says: Do not include gambling winnings except winnings from other states lottery, then it talks about NOL. My gambling winnings are from slots not lotto so I have not filled out the boxes. When I click on Continue  I am taken to a page titled "Take a look at Illinois credits and taxes". Down under the sub title "Personal, home and family credits", the line for Credit for taxes paid to another state" again has the $0 sitting in front of the grey box with the title Revisit,

After going through the above procedure try to completely answer your question I decided to review the Il return to be sure I did not get the credit I came across Form W-2g. The Spouse's W-2g was checked. My wife was the winner. The state income tax withheld box contained the correct amount of MS winnings.

Reviewing the IL1040 I see line 15 "Income tax paid to another while an Illinois resident" is 0.

I hope this answers your questions.

[BillM223]

Please look at Forms mode. Look for Schedule CR under CR. Is there a Form for Schedule CR Pg3?

If not, please go back to Schedule CR. Look at line 41. Is it zero or less than zero? If so, that is the issue. If this number for the state is zero or less than zero, the TurboTax cannot calculate a ratio, and so Pg3 is not generated (and so the credit is not calculated).

Why? In the IL instructions, for lines 40, 41, 42, and 43, it says follow the instructions on the form. OK, columns A will have federal income, let's say X. In our case, Column B will have zero.  - This is true for lines 41 and 42.

Line 43 says to divide Column B line 42 by Column A line 42. But your gradeschooler would tell you that you can't divide by zero, so the processing for Schedule CR and Pg3 stop there. And without Pg3, there is no credit for IL.

So, if you don't mind, please go to Schedule CR and tell me what are the values on line 17. and on line 32. See all the entries for lines 18 to 31? If these amounts add up to be more than your income in that column, then that amount for Column B line 33 goes to zero. So no credit.

You can see this in the simple case on Schedule CR, or much more expanded in Forms Mode in TurboTax.

The answer is that calculation for the tax paid to another state is much more complicated than just reporting the amount paid.

[cleanman2]

Please look at Forms mode. Look for Schedule CR under CR. Is there a Form for Schedule CR Pg3?

Yes there is. Line 42 Column A has a $ amount and Column B is 0, therefore Column B line 43 is 0.

If not, please go back to Schedule CR. Look at line 41. Is it zero or less than zero? If so, that is the issue. If this number for the state is zero or less than zero, the TurboTax cannot calculate a ratio, and so Pg3 is not generated (and so the credit is not calculated).

Line 41 column A has a $ amount and column B is 0, but page 3 is generated.

Line 17: Column A a positive $ amount and Column B is 0.

Line 32: Column A is 0 and Column B has no entry.

There are no entries on Lines 18 to 31.

OK, I understand why processing would stop with a divide by zero calculation, but I don't understand why Column B is always 0.

If I look at page 1 line 15 "Other income (federal Form 1040 1040-SR, Schedule 1 line 9)". Column A correctly has the amount of winnings from MS, but Column B has no entry. Shouldn't Column B contain the same amount as Column A as it is the amount of winnings outside of IL? Maybe I am missing something but this seems to be the source of all the zeros in column B in the rest of the form.

Another thin I noticed, but probable has no bearing on my problem is on the second line of Line 15 where it says "Identify each item."  JURY DUTY PAY is entered. I did not have any jury duty pay in 2022, I know I have had it in the past but not 2022.

[ErnieS0 · Accepted solution]

You’re going on a roundabout way of doing this.

1. In the Illinois section, go to “Tale a look at Illinois credits and taxes”
2. Select Credit for taxes paid to another state
3. On “Credit for Taxes Paid to Other States,” mark YES
4. On “Illinois Base Income Taxed by Other State” enter Mississippi as your state, along with Income Taxed by Other State and Tax Paid to Other State
5. On “Other States Income and Tax Summary, mark DONE
6. Skip “Wage income from outside Illinois”
7. On “Income from outside Illinois, enter your Mississippi income

[cleanman2]

Thank you. I now have gotten credit on my Il return for taxes paid to MS. What I did was I deleted the MS info and started over. The critical thing was entering the MS income in your step 7. But why did I not enter anything there the first time? If you look at the screen shot in your reply to me you will see a Note: and that note says to only enter gambling winnings from another states LOTTERY. My winnings were from SLOTS.

I think those directions should be reviewed because by following those instructions I could not get the IL credit.

I want to thank all that responded. I was pleasantly surprised at how fast you responded to my questions. My experience with help forums I've used in the past were never this positive. Great job.