Income tax query regarding PA and IL?


I would really appreciate if you could help me with my tax situation.

I am an IT consultant/contractor and my employer is based in Schamburg, Illinois. Since I am a contractor I am working at a client location in Lansdale PA. For the full year of 2006 I lived and maintained residence in PA only. My taxes were deducted from my paychecks for the state of Illinois only. Now when I am filing my returns, since I am a full year resident of PA, I owe taxes to PA.

Questions 1: Can I get a full refund from Illinois??

Even though I was employed by a company there, I didn't maintain a residence there or live there. I was told that there is no reciprocal agreement between IL and PA and hence I cant get a refund from IL and have to pay taxes to PA as well. I am not sure if this is true. Why should I pay taxes to both the states?

Can you please help or provide any advice??



5 Answers

  • Anonymous
    1 decade ago
    Favorite Answer

    Complete form IL1040 and Sch NR for Illinois, as a non resident to get a refund of taxes paid, file in PA as a resident

    A nonresident taxpayer ( i.e., you were not an Illinois resident at any time during the tax year), must file Form IL-1040 and Schedule NR if

    you earned enough taxable income from Illinois sources to have a tax liability (i.e., your Illinois base income from Schedule NR, Step 5, Line 50 is greater than your Illinois exemption allowance on Schedule NR, Step 5, Line 54), or

    you want a refund of any Illinois Income Tax withheld in error. You must attach a letter of explanation from your employer.

    For more information, refer to Schedule NR, Nonresident and Part-Year Resident Computation of Illinois Tax, and that schedule’s instructions.

  • 1 decade ago

    Your employer deducted your taxes incorrectly. You should have taxes taken based on where you work, not where they are located. Your employer will need to do a W-2C for the state of IL and PA. (IL showing no earnings and PA showing ALL earnings)

    If your employer does not have a location in PA, they will have to file for a tax ID number and they will have to use your home address as the employment address. Good Luck!

    Source(s): 20 yrs payroll experience
  • 4 years ago

    You would pay tax on your profit so that would be the £1000. Your accounts will be entered into your tax return showing your total income less all your expenses leaving the profit figure - which tax and ni is calculated upon. Edit : Yes it doesn't matter if it's in your personal bank account but I would recommend setting up a business account and also keeping all paperwork relating to these transactions, because if you ever got a tax enquiry you would need to provide evidence to back up your figures. And if you can't provide the right evidence they will assume it's not business related and charge you the extra tax.

  • 1 decade ago

    You need to file IL and PA tax returns. Since you did not live in IL, you should get a total refund of those taxes paid. Time is ticking dear. You do need to file and pay your PA taxes by the deadline. Also, your company should take out taxes for PA, not IL. My husband and daughter both work in MD, but we live in PA. (two different employers) They both take out taxes for PA (not MD). If you have difficulty with your employer collecting tax money for the correct state, call PA Revenue Service and IL Revenue Service to see how to work this out.

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  • 1 decade ago

    You are probably going to need an accountant, or go to H&R Block.

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