IL nonresident unemployment benefits

[LouD]

Client moved to AZ in December 2011 and continued receiving unemployment benefits from IL in 2012 and 2013 with no state withholding and I'm not sure if they are excludable for an IL non-resident return.

ATX warning states that non-resident unemployment benefits are not taxable, the 2011 IL NR instructions state specifically that unemployment is not taxable, but the 2012 and 2013 instructions exclude that statement and state that only Alaska Fund dividends and jury duty pay are excludable.

Any IL preparers with a definitive answer for these NR unemployment benefits? Thanks for the help!

[Margaret CPA in OH]

Maybe this will answer my similar question about KY unemployment benefits paid to Ohio resident.

[ILLMAS]

IL Nonresident and Part Year Resident

Tax Year 2013

This worksheet is used to file the taxpayer's state tax return as a nonresident or part-year resident of Illinois.

Nonresidents Who Must File

The taxpayer must file a return for the state of Illinois as a nonresident if the taxpayer earned enough taxable income from Illinois sources to have some tax liability or to receive a refund of Illinois income tax that was withheld but not owed.

Part-Year Residents Who Must File

The taxpayer must file a return for the state of Illinois is he or she was a resident of Illinois for part of the year, and one of the following apply:

1. The taxpayer earned or received income from any source while an Illinois resident,
2. The taxpayer earned or received income from an Illinois source while not a resident of Illinois, or
3. The taxpayer would like to receive a refund of Illinois income tax that was withheld but not owed.

See the 2013 Schedule NR Form IL-1040 Instructions and the 2013 Form IL-1040 Instructions for more information and details.

Residency Status

Residency Status Select from the dropdown list whether the taxpayer was a nonresident or part year resident of Illinois. Dates of Residency

Part-Year Residents

Enter the dates of residency for the taxpayer and spouse if applicable from the date he or she moved to Illinois (or the first day of the tax year) to the date he or she left Illinois (or the last day of the tax year).

Nonresidents

Do not make an entry in this section.

Reciprocal State

Select from the dropdown list the state in which the taxpayer was a resident, if applicable:

• Iowa
• Kentucky
• Michigan
• Wisconsin

Reciprocal State Status

Illinois has a reciprocal agreement with these four states to not charge income tax to residents of one state working in a different state for salaries, wages, tips, or other employee compensation earned.

Caution: The taxpayer must file Form IL-W-5-NR, Employee's Statement of Nonresidence in Illinois, with his or her employer to be entitled to this exemption.

Other State Select from the dropdown list the state or other residency status (for military personnel) in which the taxpayer was a resident if he or she did not live in one of the 4 reciprocal states listed above. Form IL-1040 - Misc Payments, Adjustments Line 6

Enter the amount of any Illinois tax refund included on U.S. 1040, Line 10.

Do not include amounts from any other state.

Note: If the taxpayer used this tax preparation service in a previous year, the amount from the prior year will be automatically used to calculate this amount. However, an entry can still be made on this line to override that amount.

Line 25 Enter the amount of any Illinois tax withheld except for amounts already reported on the Form W-2, W-2G, or 1099-R worksheets. Schedule M - Other Additions and Subtractions Distributive Share of Subtractions

Enter the distributive share of subtractions received from a partnership, S corporation, estate, or trust.

An Illinois entity will send the taxpayer an Illinois Schedule K-1-P, Partner's or Shareholder's Share of Income, Deductions, Credits, and Recapture, or Illinois Schedule K-1-T, Beneficiary's Share of Income and Deductions, specifically identifying the income.

Schedule ICR - Illinois Credits

Homeowner's Property Tax Credit

This credit is available to taxpayers who paid taxes during the tax year for their Illinois principal residence, which does not include a vacation home or rental property, if they owned and lived in the property during the previous tax year.

If the taxpayer sold the home during the previous tax year, no credit is available even if property taxes were paid during the current tax year.

If the taxpayer sold the home during the current tax year, the taxpayer can take a credit for the property taxes paid in the previous tax year plus the portion of property taxes paid for the current tax year for the time the taxpayer owned and lived in the home. As stated above, this credit will not be available the following year.

Property Tax Paid

Enter the total amount of Illinois property tax paid during the tax year for the taxpayer's principal residence.

Do not include amounts for the mobile home privilege tax, or any penalties and fees.

Property Index Number

Enter the assigned Property Index Number (PIN).

The taxpayer can get this number from the property tax bill, the property tax assessment notice, the mortgage lender, or the county assessor's office where the property is located.

Property Tax as Business Expense Enter any portion of the property tax entered on the previous line that was deducted as a business expense on the federal return.

Schedule G-Voluntary Charitable Donations

Contributions to these funds may be in any amount ($1 or more) and will decrease the taxpayer's overpayment or increase the taxpayer's balance due.

Contribution Amount

Enter the amount the taxpayer would like to contribute to one or more of the funds listed.

Note: The taxpayer cannot elect to change the taxpayer's contribution to these funds on an amended return.

Schedule NR - Illinois Source Income and Adjustments

Check Box Iowa, Kentucky, Michigan, or Wisconsin Residents Only

Check this box only if the taxpayer had Form IL-W-5-NR, Employee's Statement of Nonresidence in Illinois, on file with the employer and had Illinois tax withheld from Wages in error.

Income

The amount of income the taxpayer must report will depend on whether he or she was a part-year resident of Illinois or a nonresident of Illinois, as follows:

• Nonresident

  A nonresident of Illinois must enter only that income that comes from an Illinois source.

• Part-Year Resident

  A part-year resident must enter all income earned during the period of residency regardless of the source of income. During the remainder of the year while the taxpayer was a nonresident, he or she must enter income earned according to those rules.

Note: If the taxpayer is reporting amounts for a Schedule K-1-P or K-1-T, use the form's instructions to calculate the amount for each line.

Taxable Interest Income

Nonresidents

Enter the amount of business interest income earned from an Illinois business.

Do not include any other amounts of interest earned.

Part-Year Residents

Enter all income received while an Illinois resident. Include income earned as a nonresident as describe above also.

Dividend Income

Nonresidents

Enter the amount of business dividend income earned from an Illinois business.

Do not include any other amounts of dividends earned.

Part-Year Residents

Enter all dividends received while an Illinois resident. Include income earned as a nonresident as describe above also.

Taxable Refunds, Credits, or Offsets of State and Local Income Tax

Nonresidents and Part-Year Residents

Enter the amount of any Illinois income tax refund included in federal taxable income because the refund was previously deducted as an itemized deduction on a previous year's federal return.

If the refund was for business taxes, enter the portion of the refund that was originally allocated to Illinois.

Alimony Received

Nonresidents

Do not enter an amount on this line. As a nonresident, alimony that the taxpayer received is not taxed by Illinois.

Part-Year Residents

Enter the amount of alimony received during the period of residency in the state of Illinois.

Capital Gain

or Loss

Nonresidents

Enter the amount of capital gain or loss occurring as a result of the sale of real or tangible property located within the state of Illinois at the time of disposition of the asset.

Enter the portion of capital gain or loss from business property according to how the business income or loss is allocated to Illinois.

Do not enter any amount for intangible property.

Part-Year Residents

Enter all capital gains or losses received during the period of residency in the state of Illinois. Include gains or losses as a nonresident as describe above also.

Other Gains

or Losses

Nonresidents

Enter other business gains or losses, including those reported on federal Form 4794, Sales of Business Property, according to the portion allocated to Illinois.

Part-Year Residents

Enter all other gains or losses received during the period of residency in the state of Illinois. Include gains or losses as a nonresident as describe above also.

Unemployment Compensation

Nonresidents

Do not enter an amount on this line. As a nonresident, the taxpayer's unemployment compensation is not taxed by Illinois.

Part-Year Residents

Enter all unemployment compensation received while an Illinois resident regardless of the source.

Social Security (SSA) Benefits

Nonresidents

Do not enter an amount on this line. As a nonresident, the taxpayer's Social Security benefits are not taxed by Illinois.

Part-Year Residents

Enter all Social Security income received while an Illinois resident.

Other Income

Nonresidents and Part-Year Residents

Enter the total amount of income the taxpayer received from any of the following sources:

• The Illinois State Lottery, even if the taxpayer was a resident of a reciprocal state, (no other winnings must be reported)
• A business net operating loss from an earlier year that is being carried forward. Allocate the loss as follows:
  • If from a partnership or an S corporation, the loss is allocated to Illinois to the same extent that business income from that entity is apportioned to Illinois on the Illinois Schedule K-1-P for this year.
  • If from a business the taxpayer conducted entirely within Illinois, the entire amount is allocated to Illinois.
  • If from a business the taxpayer conducted inside and outside Illinois, the portion allocated to Illinois.
• A recovery or reimbursement for a deduction claimed in a prior year to the extent that the deduction was allocated to Illinois.

Adjustments To Income

Educator Expenses

Nonresidents

Enter the amount of educator expenses incurred as an Illinois employee even though a nonresident.

Part-Year Residents

Enter the amount of educator expenses incurred while employed as an Illinois resident.

Certain Business Expenses

Nonresidents and Part-Year Residents

Enter certain business expenses of reservists, performing artists, and fee-based government officials for which the expenses are related to compensation allocable to the state of Illinois.

Include business expenses only to the extent that total business expenses are allocable to Illinois.

IRA Deduction

Nonresidents and Part-Year Residents

Enter the taxpayer's allowed Illinois IRA deduction.

Calculation of Illinois IRA Deduction

(Wages, salaries, and tips received from Illinois sources) ÷ (Wages, salaries, tips, alimony received from all sources) = __.___ × total federal IRS deduction = $ ________ Illinois deduction to be entered on this line.

Student Loan Interest Nonresidents and Part-Year Residents

Enter the amount of student loan interest the taxpayer deducted from the federal return.

Tuition and Fees Nonresidents and Part-Year Residents

Enter the amount of tuition and fees the taxpayer deducted from the federal return.

Health Savings Account

Nonresidents and Part-Year Residents

Enter the amount of health savings account deduction the taxpayer claimed this year on the federal return.

Moving Expenses Nonresidents and Part-Year Residents

Enter the amount of expenses the taxpayer paid to take a new job in Illinois, or paid while an Illinois resident to take a job outside of Illinois. The taxpayer must be able to prove the expenses were paid while an Illinois resident, if he or she took a job outside of Illinois.

One-Half of Self-Employment Tax

Nonresidents and Part-Year Residents

Enter the taxpayer's allowable Illinois deduction for one-half of self-employment tax.

How to Calculate

The first step is to calculate the taxpayer's ISE decimal (Illinois self-employment decimal). The ISE decimal should not exceed 1.0 or be less than zero.

The second step is to use the ISE to calculate the allowable deduction.

ISE Decimal

(Self-employment income allocable to Illinois) ÷ (Total federal self-employment income) = ISE decimal.

Calculation of Allowable Deduction

ISE decimal x federal deduction = Illinois deduction.

Self-Employed Health Insurance

Nonresidents and Part-Year Residents

Enter the taxpayer's allowable Illinois deduction for self-employed health insurance.

How to Calculate

Use the same directions as above for self-employment income. The ISE decimal is calculated the same way, and the federal self-employed health insurance deduction is used.

KEOGH, Self-Employed (SEP), SIMPLE, and Qualified Plans

Nonresidents and Part-Year Residents

Enter the taxpayer's allowable Illinois deduction for contributions made to a KEOGH, SEP, SIMPLE, or other qualified plan.

How to Calculate

Use the same directions as above for self-employment income. The ISE decimal is calculated the same way, and the federal qualified plan deduction is used.

Penalty On Early Withdrawal of Savings

Nonresidents

Enter any early withdrawal penalty paid on a business savings account that was earning interest allocable to Illinois, allocating the portion of the penalty in the same manner as allocating interest earned in Illinois for that same account.

Part-Year Residents

Enter any amount of penalty on the early withdrawal of savings paid while a resident of Illinois regardless of the source. Enter any other penalty paid while a nonresident according to those rules.

Alimony Paid

Nonresidents and Part-Year Residents

Enter the amount of alimony paid that is also entered on the federal return.

Domestic Production Activities

Nonresidents and Part-Year Residents

Enter the amount of domestic production activities deduction entered on the federal return that is allocable to Illinois.

Apportion any deduction from a partnership or S corporation in the same manner as the business income.

Apportion deductions from more than one source by apportioning the amount from each source separately.

Illinois Additions and Subtractions Federally Tax-Exempt Interest Income

Nonresidents

Enter the amount of any federally tax-exempt interest earned as part of a business conducted in Illinois.

Do not enter any amounts earned that are not related to a business.

Part-Year Residents

Enter the amount of any federally tax-exempt interest earned during the taxpayer's residency in Illinois. Enter interest earned as a nonresident according to those rules.

Other Additions

Nonresidents

Enter any of the amounts received as follows:

• Any distributive share of additions received from partnerships, S corporations, trusts, and estates as reported on Schedules K-1-P and K-1-T
• Withdrawals made from a Medical Care Savings Account established in connection with the Illinois employment
• Any Lloyds plan of operations loss if reported on the taxpayer's behalf on Form IL-1023-C, Composite Income and Replacement Tax Return, and included in adjusted gross income
• Any amount reported on Form IL-4562, Special Depreciation, that resulted from Illinois property-Allocate the amounts appropriately if they were not from a business conducted entirely in Illinois.
• Business expense recapture if the taxpayer reported income from an asset or activity as business income in prior years and reported any income from that asset or activity as nonbusiness income on Schedule NR for this year
• Recapture of deductions for contributions to Illinois college savings plans transferred to an out-of-state plan

Part-Year Residents

Enter any amounts as listed above for nonresidents that were received while the taxpayer was a resident of the state of Illinois. Enter all amounts received while a nonresident according to those rules.

Federally Taxed Retirement and Social Security

Nonresidents

Do not enter an amount on this line. As a nonresident, federally taxed Social Security and retirement income are not taxed by Illinois and should not be included.

Part-Year Residents

Enter the amount of federally taxed Social Security and retirement income received as an Illinois resident and that is included in the Illinois portion of federal adjusted gross income.

Illinois Income Tax Overpayment

Nonresidents and Part-Year Residents

Enter the amount of any Illinois income tax payment included as income.

Other Subtractions

Nonresidents

Enter any of the amounts as follows:

• "Bright Start" or "Bright Directions" College Savings Pool contributions and "College Illinois" Prepaid Tuition Program contributions from Schedule M, Other Additions and Subtractions for Individuals, Lines 11a, 11b, and 11c
• Restoration of amounts held under claim of right from Schedule M, Line 13
• Contributions to a job training project from Schedule M, Line 14
• Enter the amount of the following items from Schedule NR, that is included as a federal subtraction and as Illinois income:

  • August 1, 1969, valuation limitation
  • Enterprise zone or river edge redevelopment zone and high impact business dividend subtraction
  • Ridesharing money and other benefits
  • Payment of life insurance, endowment, or annuity benefits received
  • Lloyds plan of operations income if reported on the taxpayer's behalf on Form IL-1023-C
  • Illinois Pre-Need Cemetery Sales Act trust income
  • Education loan repayments to primary care physicians
  • Reparations or other amounts received as a victim of persecution by Nazi Germany
  • Interest from obligations of Illinois state and local government
  • The taxpayer's child's interest income reported on U.S. Form 8814

• Distributive share of subtractions from a partnership, S corporation, trust, or estate - Enter the amount reported to on Schedule K-1-P or Schedule K-1-T from the partnership, S corporation, trust, or estate.
• Expenses of federally tax-exempt income and federal credits for expenses related to the following:

  • Federal credits from Column A, and
  • Income that is exempt from federal taxation by multiplying the federal amount by the percentage of that income that was included in the Illinois income of Schedule NR for the line on which this income was added back to base income.

• Home Ownership Made Easy Program income - Enter the amount from federal income that was received while a resident or included as income for Illinois on any line of Schedule NR for this year or any prior year.
• Any amount reported on Form IL-4562, Special Depreciation, that resulted from Illinois property-Allocate the amounts appropriately if they were not from a business conducted entirely in Illinois.
• Recovery of items previously deducted on U.S. 1040, Schedule A - Enter any amount from federal income that is included as income in your Schedule NR, Illinois income.
• Employer's contributions made on the taxpayer's behalf to an account established under the Medical Care Savings Account Act and the interest earned - Enter any amount from Federal income that is paid by an employer whose compensation is included in Schedule NR, Illinois income.
• Non-U.S. bond interest - Enter the amount of any interest income from bonds issued by the governments of Guam, Puerto Rico, or the Virgin Islands, or the mutual mortgage insurance fund included in Illinois income.
• Railroad unemployment - Enter any amount from federal income that is included as income in Schedule NR, Illinois income.

Part-Year Residents

Enter any amounts as listed above for nonresidents that were received or incurred while the taxpayer was a resident of the state of Illinois. Enter all amounts received while a nonresident according to those rules.

[Hillenburg]

I believe only unemployment benefits paid to railroad workers (good union lobby) is excludable.

[LouD]

thank you very much MAS - can you tell me what publication/instruction this came from so I can have it in my file as I wasn't able to track down this info anywhere - much appreciated!