CPE Recommendations for IL?

I know, generally Illinois returns are super easy, but these darn multi state returns (and why Illinois wants its residents to pay taxes on the same income that is earned and taxed in other states) is driving me crazy.

Anyone have some recommendations for the multi state stuff?

Thanks

I took some multi-state CPE classes several years ago but never found them as helpful as I would have liked. They were generic overviews because there are 40+ different sets of rules to deal with. Are you looking for specifics on certain states that come up a lot in your practice, or is it a generic conceptual overview that you're looking for?

As for the why, well, it's because pretty much everybody else does it, including the federal income tax rules, and if Illinois didn't do it, they'd lose tax revenue.

I took some multi-state CPE classes several years ago but never found them as helpful as I would have liked. They were generic overviews because there are 40+ different sets of rules to deal with. Are you looking for specifics on certain states that come up a lot in your practice, or is it a generic conceptual overview that you're looking for?

As for the why, well, it's because pretty much everybody else does it, including the federal income tax rules, and if Illinois didn't do it, they'd lose tax revenue.

Basically, Illinois residents with multiple states. Supposedly Illinois gives credit for taxes paid to other states, but I sure would like to know when they actually do. Previous software packages that I've used would not calculate non Illinois income or taxes paid and forced me to manually determine it. The W2s that one particular client receives is so crazy, this is the first year where Illinois Wages matched the federal wages. In previous years, I would enter the W2 EXACTLY as shown, the software would efile it and then Illinois would reject it. Now I use Drake which does the calculation. This is the first year Illinois did not reject the efiled return.

It's hard to explain to a client why they are being taxed twice with no deduction. I mean the feds gives credit for foreign tax paid, which causes them to lose a lot of revenue (everytime I review some candidate's released tax returns, when everyone complains about the person's effective tax rate, the majority of the time is because that candidate got a huge credit for foreign taxes paid).

It's hard to explain to a client why they are being taxed twice with no deduction.

Illinois allows a credit for taxes paid to another state, Schedule IC CR.

Thanks for the clarification. Unfortunately, I can't help out with any IL-specific CPE. Does the University of IL Tax School cover IL-specific topics?

The credit is limited to IL's tax rate. Illinois has one of the lowest income tax rates around, which means that the credit will often not completely offset the other state's tax. So if the taxpayer works in Utah (with a flat 5% income tax rate), the taxpayer is basically only paying tax on that income to Utah, and not Illinois.

Illinois allows a credit for taxes paid to another state, Schedule IC.

I thought it was Schedule CR?

I thought it was Schedule CR?

Right - "Schedule CR Credit for Tax Paid to Other States" .

It's hard to explain to a client why they are being taxed twice with no deduction.

Illinois allows a credit for taxes paid to another state, Schedule IC CR.

It 'allows' the credit, but it doesn't give the credit. Client paid $657 in taxes to Indiana, Kansas, and Ohio. Credit allowed? Zero.

Thanks for the clarification. Unfortunately, I can't help out with any IL-specific CPE. Does the University of IL Tax School cover IL-specific topics?

The credit is limited to IL's tax rate. Illinois has one of the lowest income tax rates around, which means that the credit will often not completely offset the other state's tax. So if the taxpayer works in Utah (with a flat 5% income tax rate), the taxpayer is basically only paying tax on that income to Utah, and not Illinois.

Illinois allows a credit for taxes paid to another state, Schedule IC.

I thought it was Schedule CR?

From my experience, the Illinois resident would pay the 5% to Utah plus the 3.75% to Illinois.

Thanks for the clarification. Unfortunately, I can't help out with any IL-specific CPE. Does the University of IL Tax School cover IL-specific topics?

I checked the Univ of IL website. They have an Illinois update class, LLC, trust, and I think that's about it. Most of the Illinois Income Tax is pretty easy. My weak area is the multi states.

Thanks for the clarification. Unfortunately, I can't help out with any IL-specific CPE. Does the University of IL Tax School cover IL-specific topics?

The credit is limited to IL's tax rate. Illinois has one of the lowest income tax rates around, which means that the credit will often not completely offset the other state's tax. So if the taxpayer works in Utah (with a flat 5% income tax rate), the taxpayer is basically only paying tax on that income to Utah, and not Illinois.

Illinois allows a credit for taxes paid to another state, Schedule IC.

I thought it was Schedule CR?

From my experience, the Illinois resident would pay the 5% to Utah plus the 3.75% to Illinois.

Sounds like you might be handling incorrectly.

My weak area is the multi states.

First stop for me is the form instructions, work through an example...

It's hard to explain to a client why they are being taxed twice with no deduction.

Illinois allows a credit for taxes paid to another state, Schedule IC CR.

It 'allows' the credit, but it doesn't give the credit. Client paid $657 in taxes to Indiana, Kansas, and Ohio. Credit allowed? Zero.

Boy, that can't be right. Would you be willing to share the figures from that tax return's Schedule CR lines 51-55? I don't think that would disclose anything too bad but it might help identify the issue.

It 'allows' the credit, but it doesn't give the credit. Client paid $657 in taxes to Indiana, Kansas, and Ohio. Credit allowed? Zero.

Boy, that can't be right. Would you be willing to share the figures from that tax return's Schedule CR lines 51-55? I don't think that would disclose anything too bad but it might help identify the issue.[/quote]
Absolutely!

Here is the client's 5 page W2 from one employer:
Page 1:
Federal Wages: 99147
Federal Tax: 12109
IL Wages: 76043
IL Tax: 2634
State exemptions - 3

Page 2:
Federal Wages: 99147
Federal Tax: 12109
KS Wages: 694
KS Tax: 8
IL Wages: 23104 (yes, again it's listed, the wage plus the wages from page 1 equal federal wages)
IL Tax: 86 (yep, I don't know where they got $86, three exemptions present, I calculate that they should have withheld $866)
State exemptions - 3

Note: the 23104 is the total of the three non reciprocal states, Kansas, Indiana, and Ohio.

Page 3:
Federal Wages: 99147
Federal Tax: 12109
IN Wages 3282
IN Tax 108
IN Wages 4443 (Yes, it stutters here)
IN Tax 139
State exemptions - 2

Page 4:
Federal Wages: 99147
Federal Tax: 12109
WI Wages 1387
WI Tax 80
KS Wages 3448 (Yes, were' in Kansas again)
KS Tax 118
State exemptions - 3

Page 5:
Federal Wages: 99147
Federal Tax: 12109
OH Wages 10907
OH Tax 431
IA Wages 2107
IA Tax 133
State exemptions - 2

Illinois reciprocal states are: Iowa, Kentucky, Michigan, or Wisconsin.

What I did on form CR:

1.Wages, Salaries, Tips, Column A = Federal = 99,147, Column B = Non Illinois = 23,104 (Indiana 7,725, Kansas 4,472, and Ohio 10,907).
43. Decimal - Column B/Column A = .23
51. Total Income Tax Paid to Other States on Illinois Base Income = $657 (Indiana $232, Kansas, $144, Ohio $281)
52. Illinois Tax Due (99,147 minus 5 dependents, adjusted gross 88,397 * .0375) = 3,315
53. Decimal from above: .23
54. 52 * 53 = $763
55. Lesser of 51 or 54 = $657.

Illinois sent client a letter disallowing the Non Illinois of 23,104. This meant that the decimal on line 43 was zero, so credit was reduced to zero.

From my experience, the Illinois resident would pay the 5% to Utah plus the 3.75% to Illinois.

Sounds like you might be handling incorrectly.

See post # 13 and let me know.

My weak area is the multi states.

First stop for me is the form instructions, work through an example...

See post # 13

Illinois sent client a letter disallowing the Non Illinois of 23,104. This meant that the decimal on line 43 was zero, so credit was reduced to zero.

Seems to me like you prepared it correctly. This looks like an administrative problem, not a problem with your skills as a preparer, so you needn't worry there.

This will take a letter or twelve to the ILDOR straighten out. You might need a letter from the employer proving that 23,104 in wages were out of state; you might need to send the copy of the W-2 and/or other state forms in response.

Out of curiosity, on the W-2 entry screen, did you have 99,147 or 76,043 for IL wages? Not that it should matter here.

Illinois sent client a letter disallowing the Non Illinois of 23,104. This meant that the decimal on line 43 was zero, so credit was reduced to zero.

Seems to me like you prepared it correctly. This looks like an administrative problem, not a problem with your skills as a preparer, so you needn't worry there.

This will take a letter or twelve to the ILDOR straighten out. You might need a letter from the employer proving that 23,104 in wages were out of state; you might need to send the copy of the W-2 and/or other state forms in response.

Out of curiosity, on the W-2 entry screen, did you have 99,147 or 76,043 for IL wages? Not that it should matter here.

Thanks for your help and vote of confidence.

There were two line items for Illinois, one for $76,043, and one for $23,104 (two other states had two line items). The software wouldn't efile the federal or any of the states unless I combined them.

Thanks for your help and vote of confidence.

There were two line items for Illinois, one for $76,043, and one for $23,104 (two other states had two line items). The software wouldn't efile the federal or any of the states unless I combined them.

Happy to do so.

I'm curious what would have happened if you had only put $76,043 in wages on the W-2 for Illinois, if the return would have been processed correctly. Probably not, honestly, the IL DOR is not fun to deal with on the best of days and I've had trouble with them on similar issues before.

Thanks for your help and vote of confidence.

There were two line items for Illinois, one for $76,043, and one for $23,104 (two other states had two line items). The software wouldn't efile the federal or any of the states unless I combined them.

Happy to do so.

I'm curious what would have happened if you had only put $76,043 in wages on the W-2 for Illinois, if the return would have been processed correctly. Probably not, honestly, the IL DOR is not fun to deal with on the best of days and I've had trouble with them on similar issues before.

I'm guessing that when they did the W2 matching, the client would get a notice.

Thanks again.

@CathysTaxes - did you ever get to the bottom of this IL issue? Do they really have the right to double tax the same income as another state taxes, and not give a credit (partial due to difference in tax rates) for the tax paid to the other state? I have a client who got the dreaded letter from the ILDOR disallowing the credit for tax paid to another state, basically saying they tax all IL income because his home office is in IL, even though he travels to another state to do the majority of the work and pays tax in that other state.