State Income Tax Withholding Split Between States Incorrectly

[Descriptor]

Greetings,

I moved between states this year to pursue a new job. I worked remotely in Alabama for a few months at this new job before moving on-site to Illinois in April. However, due to a miscommunication, my employer didn't know I had moved in-state until November, so had been withholding taxes for Alabama that entire time, rather than Illinois.

Both states have fairly similar income taxes, so I imagine it should just be a matter of getting the money back from AL and giving that straight to IL. But how do I alert both states to this fact when I file my taxes? Is it simply a matter of calculating what part of my income I actually made in each state and then entering that into my state returns? Will it be a problem that it disagrees with the info on my W-2?

Any help would be appreciated.

[DavidD66 · Accepted solution]

You will file a part-year resident return for both Alabama and Illinois.  Each state will have screens where you will allocate the amount of income and deductions.  (See screenshot below of Alabama Wage Summary page.)  You need to calculate the amount of earnings that should be included on your Alabama return and make the adjustment on the Alabama Wage Summary page.  You will make a similar adjustment to add income to your Illinois return.  You will end up owing additional Illinois tax, and getting an Alabama refund.  You don't need to make any additional notification to the states.  Reporting an amount that is different than what is on the W-2 could result in a letter of inquiry from Alabama since you are reducing the amount of income reported on the W-2.

[Descriptor]

Ah, fantastic, that is very helpful! I think I can do all that, at least rounded to the nearest paystub. It also looks like I will need to mail in my return to Alabama, which is annoying, but I guess at least doable.

Now, this letter of inquiry, what does that entail? Will I have to send proof that I paid the tax somewhere else, so they know that I'm not just vanishing it into thin air? And should I presume that my AL tax return will take quite a lot longer to come my way? Luckily, my federal return looks like it will cover the IL difference, so I won't be in the hole. I'll be glad when this is all sorted and done with!

[AnnetteB6]

If you are filing your AL return by mail, it will take longer to process than if it had been electronically filed.

If you do get a letter of inquiry, there should be information in the letter telling you what you need to do.  It may just be a matter of providing a copy of the IL return showing that the other income was reported to that state.  Just wait and see because you may or may not need to provide additional information.  Also, be sure to keep your documentation and notes about how you divided the income between the states.  

@Descriptor