Unemployment Income: Moved to a New State (PA) in July but my only income source is Unemployment from Previous State (IL)

[abcd_tcb]

I earned W-2 income in Illinois (IL) through July but lost employment and moved in with family in Pennsylvania (PA) for the rest of the year, where I still reside. 

I collected unemployment benefits from Illinois while living here in PA.   I did not earn any other income in PA, so  I have some questions. 

1) Should I file 2 separate part-year resident returns for IL and PA (what I am currently doing)? 

2) Which state do I file my unemployment benefits received? - From research it seems like PA, but when filling out my part-year resident return there is no space to enter this - unless I manually enter it as Miscellaneous Compensation  with the closest "type of income" being "nonemployee compensation." 

However, 

When filing my IL part-year resident return I receive the following prompt:  

Illinois Part-Year and Nonresidents:

Allocate all or a portion of the income reported on your federal return to Illinois based on the length of your residency or the source of the income.

Enter the amount that applies to the time you were an Illinois resident or to your activities in Illinois. 

Unemployment compensation

Federal Total $X,XXX  

Then I am asked to "Enter the amount that applies to the time you were an Illinois resident or to your activities in Illinois." in the Illinois column. 

I received the money while in Pennsylvania but they pertain to my activities (employers) in Illinois - so I am not sure if I should enter the federal total here or in another place in my PA part-year resident return.  

----------------

Since I have earned no income in PA, I am not even positive I should be filing a PA part-year resident return if this unemployment does not apply. 

Those are my big questions but also an additional detail - 

3) The 10a State Box on my 1099-G was left blank, but I am required to fill in that detail when going through the TurboTax process - I am assuming to select Illinois since that is the state that issued it, but also know this correlates to State Income Tax witheld so want to be sure not to actually list PA here. 

Thank you so much for any clarification you can provide, it has definitely been an unusual year! 

[abcd_tcb]

I collected unemployment benefits from Illinois while living here in PA.   I did not earn any other income in PA, so  I have some questions. 

1) Should I file 2 separate part-year resident returns for IL and PA (what I am currently doing)? 

2) Which state do I file my unemployment benefits received? - From research it seems like PA, but when filling out my part-year resident return there is no space to enter this - unless I manually enter it as Miscellaneous Compensation  with the closest "type of income" being "nonemployee compensation." 

However, 

When filing my IL part-year resident return I receive the following prompt:  

Illinois Part-Year and Nonresidents:

Allocate all or a portion of the income reported on your federal return to Illinois based on the length of your residency or the source of the income.

Enter the amount that applies to the time you were an Illinois resident or to your activities in Illinois. 

Unemployment compensation

Federal Total $X,XXX  

Then I am asked to "Enter the amount that applies to the time you were an Illinois resident or to your activities in Illinois." in the Illinois column. 

I received the money while in Pennsylvania but they pertain to my activities (employers) in Illinois - so I am not sure if I should enter the federal total here or in another place in my PA part-year resident return.  

----------------

Since I have earned no income in PA, I am not even positive I should be filing a PA part-year resident return if this unemployment does not apply. 

Those are my big questions but also an additional detail - 

3) The 10a State Box on my 1099-G was left blank, but I am required to fill in that detail when going through the TurboTax process - I am assuming to select Illinois since that is the state that issued it, but also know this correlates to State Income Tax witheld so want to be sure not to actually list PA here. 

Thank you so much for any clarification you can provide, it has definitely been an unusual year! 

[MarilynG1]

You don't need to file a Pennsylvania Part-Year Resident Return, since you earned no income there.

You would report your Unemployment you received from Illinois on your Illinois Part-Year Return.  

You should only be taxed on a % of your total income, since you only lived there part of the year. 

If Illinois does not Allocate your Income for you, click this link for How to Allocate Income for a Part Year Resident . 

[abcd_tcb]

Hi @MarilynG1, 

Thank you so much for your response! 

I do want to clarify that I was (and still am) a resident of PA for the entire duration I collected Illinois unemployment taxes.  I continued to pour through the forum and other resources and many others in similar situations

such as: 

https://ttlc.intuit.com/community/state-taxes/discussion/unemployment-from-one-s[product key removed...

https://ttlc.intuit.com/community/state-taxes/discussion/filing-state-tax-return-on-unemployment-pay...

have led me to believe I should actually file these benefits with PA.  What would make my case different? 

I definitely am wary of responding: $0 to the question - "Enter the amount that applies to the time you were an Illinois resident or to your activities in Illinois" as the benefits were connected to Illinois, but it is true that I was a PA resident the entire time receiving them... 

Thank you so much for your time. 

[MarilynG1]

@abcd_tcb  If the Unemployment was paid to you by the State of Illinois, it is IL income.

In one of the examples you linked, the person's unemployment was transferred to Arizona and the funds were actually disbursed by the State of Arizona. 

[ErnieS0]

Do not file a Pennsylvania income tax return if your only income while a PA resident was Illinois unemployment benefits. Unemployment is not taxable in PA.

Refer to: Is unemployment compensation taxable?

Illinois unemployment is taxable to Illinois so you will have to file an Illinois tax return. The Illinois Department of Revenue says:

Unemployment compensation included in your federal adjusted gross income is taxable to Illinois if

• you earned it while you were an Illinois resident or
• you received it from the Illinois Department of Employment Security as a nonresident.

Refer to: Is unemployment income taxable?

[abcd_tcb]

Thank you again for your time - very helpful! 

[abcd_tcb]

Thank you so much for your time and for clarifying these Illinois specific guidelines! 

[abcd_tcb]

(@ErnieS0 @MarilynG1)

One last question before I file - thank you again for your time and clarification, I feel much more at ease: 

Since I am a PA resident - and that is my mailing address - I am automatically asked to fill out a part-year PA resident return. 

Should I attempt to delete this section (again, automatically generated by TurboTax) instead of filing one for a $0 return (which I assume could add unnecessary confusion to the system)? 

I guess I am just concerned about the possible "red flags" of being a PA resident but not filing a tax return, even though I am filing a federal one.  Or also, filing one part-year tax return even though I assume the norm is multiple part-year tax returns.  

Thank you both again for your time and help! 

[ErnieS0]

Yes. Delete the PA return. You should not file a $0 return.

Pennsylvania says, “Every resident, part-year resident or nonresident individual must file a Pennsylvania Income Tax Return (PA-40) when he or she realizes income generating $1 or more in tax, even if no tax is due (e.g., when an employee receives compensation where tax is withheld).”

Refer to Who Must File.

You have no PA tax since unemployment benefits are exempt from tax in PA.

You will not generate any red flags with PA since your W-2 or 1099-G are from Illinois. People often have different addresses than the state they file in because they move from January through April 15.

Filing only one part-year return is not as common as filing more than one state return, but it’s not rare. Nine states do not have an income tax so if someone moves to or from one of those nine states, there will only be one part-year return.

[abcd_tcb]

@ErnieS0  -  Thank you! 

My residency is definitely in other PA databases for 2020 (i.e. PA Medicaid - which if anything would confirm that I make no income), but I tend to overthink these things.  

Thank you so much for providing sources as well, it once again helps put my mind at ease during a very confusing year. 🙂