How to file state taxes? Income generated in one state, lived in another

Forum|Forum|3 years ago
February 3, 2023
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I lived in AR for the entirety of 2022. I was paid in IL and all taxes withheld for 2022 went to IL. How do I file my state taxes? My current approach is file a non-resident IL return, and an AR resident return. How should I get credit for the IL taxes already withheld on my AR return?

Best answer by KeshaH

Did all of that in the exact order you mentioned. AR did credit the amount I paid to IL. However, there the difference that is basically "ghost" money. IL keeps it although I did not live there, but on top of that, asking for $139 extra in taxes. That is the part I am not sure about

Apologies, I didn't see the entire thread.

This situation happens when the nonresident state has a higher tax rate than the resident state. Your resident state will give you a credit up to the amount of tax that you would have had to pay on that income in that state. If you're paying a higher tax rate to the nonresident state, the credit that you would get in your resident state would be less than the tax paid to the nonresident state, as you're seeing in your case.

@moosejaw50

SharonD007

You are correct that you will file a resident tax return for the state of Arizona and non-resident tax return for Illinois, but you will not be taxed on the same income in both states.

It is important that you complete your tax returns in the correct order to ensure that the state taxes paid credit will be calculated correctly.

1) Prepare your federal tax return and have it pass an error check

2) Prepare your nonresident state (Illinois) next

3) Lastly, prepare your resident state (Arizona).

For additional information, please review the TurboTax article Multiple States—Figuring What's Owed When You Live and Work in More Than One State.

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moosejaw50Author

Thank you! Can I reset the state entries and start over? Also on the Ark state return, on which screen do I enter that I need the credit from the IL taxe?