It depends. If you live in IL, then YES, you will need to pay Illinois state taxes on your income for the rest of the year since Indiana and Illinois do not have a reciprocal agreement. However, you may be able to claim a credit for taxes paid to Indiana on your IL return.
In general, your home state will tax all in come from all sources. What you will do is you will file a nonresident return for the states that you do not reside in, but you visit for work and earn money in. When you file, you will fille out your nonresident states first. Then you will fill out your resident state, claiming a credit for taxes paid to the nonresident states on your home state return. You may or may not still end up owing money to your resident state depending on whether or not their tax rate is higher or lower than your nonresident state. If the non resident state had a higher tax rate than your resident state, your credit will be limited to the amount of tax you would have paid to your resident state. They will not give you a refund of the taxes you paid to the nonresident state.
You may want to ask your employer to withhold taxes for IL instead of IN. If they will not, and if your IL taxes will be higher than what they withhold for IN, it would be a good idea to make estimated tax payments to IL so you do not end up owing a penalty.
Multiple States
File Non Resident State Return
If you moved to IN, then you would not need to pay taxes to IL on the income earned after you moved to IN. You then filing a Part Year Resident return for both IN and IL and allocate the income based on where it was earned.
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