Iowa has a reciprocal agreement with Illinois. This means the wages and salaries earned by the taxpayer should be taxed only in the taxpayer's state of residence.
If the employer accidentally withheld Illinois taxes from the Iowa resident taxpayer's pay, the taxpayer should file a nonresident Illinois return to claim a refund of the taxes withheld.
The first step is to complete an Iowa resident tax return. Next, create or edit the Illinois return and select as follows:
- Net Income
- State Where You Filed a tax Return - Indicate taxpayer was a resident of Iowa.
- Illinois Income
- Wages, Salaries, tips etc
- Adjustments to State Wages - Enter wages as a negative number.
The Illinois return must be printed, signed, and mailed to the state. Include the following:
- A note explaining that the taxpayer is a resident of Iowa;
- A copy of the Iowa return;
- Copies of the Illinois W-2(s) showing the income.
To claim exemption from future Illinois withholdings, the taxpayer should file form IL-W-5-NR with their employer.
Additional Information:
Iowa Resident Return Instructions