Octopus Overlords

Michelle (who no longer lives here in practice, but is still on the books as a resident) just took a job across the state line in Illinois. She's trying to figure out whether it would be to her advantage to become a legal resident of Illinois to avoid higher taxes/other hassles.

I have not had an earned income in more than 20 years, so I'm way out of date on anything tax related. Can anyone offer any thoughts?

IANAA, but a quick Google search shows that Indiana and Illinois have no tax reciprocity agreements, so she'd owe state income taxes to both states as an Indiana resident.

I remember when I lived in California they wanted their taxes no matter where in the world you earned the money. Even in a gulag I suspect.

dbt1949 wrote: ↑Tue Jan 31, 2023 7:57 pm I remember when I lived in California they wanted their taxes no matter where in the world you earned the money. Even in a gulag I suspect.

which is funny, because recently I received an inflation relief check. CA isn't taxing it as income, but the FED is, and man they took $215 out of the $1050 I received when I filed my taxes. BOO

Where does she plan to live for the majority of the year? Since she’s working in IL, IL will withhold income tax.

The IL income tax rate is 4.95%. The IN income tax rate is 3.23%. IL doesn’t tax the first $2,375 of income, while IN taxes after the first $1,000 income. Each state has different credits and deductions.

You need to do the math to know the tax — and whether it’s worth dealing with two states.

I am not an accountant but I think the year she moves, if there is income in both states, she will have to file with both states. After that she only needs to file in her state of residence if that is the only state where she had income.

Scuzz wrote: ↑Tue Jan 31, 2023 10:54 pm I am not an accountant but I think the year she moves, if there is income in both states, she will have to file with both states. After that she only needs to file in her state of residence if that is the only state where she had income.

I don't think the state of residence, as much as the state the income was earned. She can live in IN, not have to file in IN if all of her income is earned in IL (where she does have to file). But I defer to Zarathud in all such maters.

Jeff V wrote: ↑Tue Jan 31, 2023 10:56 pm

Scuzz wrote: ↑Tue Jan 31, 2023 10:54 pm I am not an accountant but I think the year she moves, if there is income in both states, she will have to file with both states. After that she only needs to file in her state of residence if that is the only state where she had income.

I don't think the state of residence, as much as the state the income was earned. She can live in IN, not have to file in IN if all of her income is earned in IL (where she does have to file). But I defer to Zarathud in all such maters.

That is what I basically said. She will have to file in any state where she had income.

Scuzz wrote: ↑Tue Jan 31, 2023 11:00 pm

Jeff V wrote: ↑Tue Jan 31, 2023 10:56 pm

Scuzz wrote: ↑Tue Jan 31, 2023 10:54 pm I am not an accountant but I think the year she moves, if there is income in both states, she will have to file with both states. After that she only needs to file in her state of residence if that is the only state where she had income.

I don't think the state of residence, as much as the state the income was earned. She can live in IN, not have to file in IN if all of her income is earned in IL (where she does have to file). But I defer to Zarathud in all such maters.

That is what I basically said. She will have to file in any state where she had income.

And, quite frankly, we need her contribution!