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 taxpayers pay, file a nonresident Illinois return to claim a refund of the taxes withheld.
- Complete the Iowa Resident Return
- Add or Edit Illinois Nonresident Return
- Part Year and Nonresident Questions - Indicate taxpayer was a resident of Iowa
- Return to Federal Main menu
- Federal Section
- Income
- Wages and Salaries
- Edit the W-2 with Illinois source income - Remove the amount in Box 16
Disregard any warnings about the withholdings. The Illinois return must be printed, signed and mailed to the state. Include a note explaining the taxpayer is a resident of a reciprocal state, a copy of the Iowa return and copies of the Illinois W-2(s) showing the income.
To claim exempt from future Illinois withholdings, file form IL-W-5-NR with the taxpayers employer.
Additional Information:
Iowa Resident Return Instructions