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Question
I live in Illinois but W2 says CA how do I file state taxes?
AI accountant’s answer:
If you live in Illinois but received a W-2 with California wages, you may need to file tax returns for both states. Here's how you can handle this situation: 1. File a nonresident California state tax return (Form 540NR) to report your California-source income. You'll need to report the wages listed on your W-2 as California-source income if they were earned while you were working in California, even temporarily. You might also need to report any other California-source income, such as rental or business income. 2. File a resident Illinois state tax return (Form IL-1040) to report your worldwide income, including the wages you earned in California listed on your W-2. Illinois residents are taxed on their entire income, regardless of where it was earned. However, you may be eligible for a credit for taxes paid to another state (in this case, California) to avoid double taxation. To claim this credit, you'll need to complete Schedule CR – Credit for Tax Paid to Other States and attach it to your Illinois Form IL-1040. You'll need to provide information about the tax paid to California and calculate the credit based on the lesser of the tax paid to California or the tax that would have been paid if the income was earned in Illinois. It's important to prepare your state tax returns in the correct order, starting with the nonresident state (California) and then moving on to the resident state (Illinois). This ensures you have the necessary information to claim the credit for taxes paid to another state correctly. Please note that tax laws and forms may change, so double-check the current forms and instructions on the official state websites for California (ftb.ca.gov) and Illinois (www2.illinois.gov/rev) before you file your tax returns.
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Michael Eaton, CPA
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