Do I have to pay state tax on unemployment compensation received to the state that I received it from even though I am no longer a resident there?

I received unemployment compensation from the state of Oregon in 2010 and 2011.  In 2010, I moved out of the state to New York, but my unemployment compensation continued to withdraw Oregon state tax from my payment.  I continued to receive unemployment compensation in 2011 (payments were coming from the Federal Extension portion, as the Oregon UI portion was exhausted in 2010).

I was a non-resident of Oregon for all of 2011.  I am paying filing Federal and New York State taxes.  Am I entitled to a full refund of the Oregon state tax that were withheld from the Unemployment compensation payments?
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    Dear TheNewYorker:

    As an Oregon nonresident, your unemployment benefits still remain taxable by Oregon, due the the fact that they are considered "Oregon Source" income.  The federal extension / Oregon UI split that you cite is indeed interesting . . . but unfortunately is irrelevant in determining the taxability of your unemployment income.  As long as your unemployment checks continue to be sent by virtue of once having an Oregon job, the benefits are taxable by Oregon.  (Please see Page 4 of the Form 40N instructions for confirmation.)

    http://www.oregon.gov/dor/forms/personal/part-year-nonresident_101-045_2011.pdf


    That said, as a New York resident, your unemployment benefits are also taxable by New York state (and city too, if you live in NYC or Yonkers).  Thus, you will be taxed by BOTH New York and Oregon on the same income.  This situation is called being "mutually-taxed" or "double-taxed."

    The way then to mitigate, or eliminate, mutual taxation by more than one state, is to request a tax credit on your state return for income taxes paid to the other state.  In your specific situation, given the facts about yourself that you give in your question, you will want to take a credit for taxes paid to New York on your Oregon nonresident Form 40N return.

    For information and details on how exactly to do that, please refer to the Oregon Form 40N, Line 55 instructions, as found on Pages 29 and 30 of the Oregon Department of Revenue document previously cited.

    Finally, any Oregon state income taxes withheld from your unemployment benefits are eligible for a refund on your Form 40N, just as would be any other income taxes withheld from any other source, to the extent that your Oregon income taxes paid exceed your Oregon income tax liability.

    Thank you for asking your question, and good luck to you!

    Regards
    • Thank you for your answer, TurboTaxGeoffreyG.

      As you suggested, I tried to take a credit for taxes paid to New York on your Oregon using my TurboTax software, but TurboTax won't let me take it on my Oregon nonresident return.  It forces me to take the taxes paid to Oregon as a credit on my New York state return.  I would preferably take it with my Oregon return since their state income tax rate is much higher than New York's.

      Does anyone know a way around this?  TurboTax won't let me delete the credit in my New York return.  Even though I delete it at the "Other State Tax Credit Summary", it keeps coming back up on that screen.  It is weird.  Please help!
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