Question

I reside in Ohio and my company (also in Ohio) pays me to work on-site for a customer in Illinois

Forum|Forum|1 year ago
December 19, 2024
2 replies
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I reside in Ohio, I have a drivers license there and the company I work for is in Ohio. The company has had me traveling to Illinois for the last 2-3 years. They pay me as if I am in Ohio, additionally I also get lodging and food money back. This last year I decided to rent an apartment. I am not sure how to do my taxes. Do I need to claim the apartment? Do I also need to file in Illinois even thought the company I work for is paying me directly from Ohio to be on-site in Illinois?

Multiple States

Hal_Al

Q. Do I need to claim the apartment?

A. No. As a W-2 employee, you are not allowed(since the 2018 tax law) any business deductions. However, your employer as allowed to reimburse you on a tax free basis. (under an "accountable plan")

Q. Do I also need to file in Illinois even thought the company I work for is paying me directly from Ohio to be on-site in Illinois?

A. Yes, since you physically work in IL. The apartment is irrelevant, you should have been filing an IL non resident return for the last 2-3 years. You also file an Ohio resident return and pay OH tax on all your income, regardless of where earned. OH will give you a credit (or partial credit if IL has a higher tax rate) for the tax you pay to IL.

rjs

"They pay me as if I am in Ohio"

That's wrong. You work in Illinois, not in Ohio. It doesn't matter that your employer's headquarters or payroll office is in Ohio. They should be withholding Illinois tax, and box 15 on your W-2 should say IL. If you file your tax returns properly, you will pay most of your tax to Illinois and very little, if any, to Ohio.

If your employer will not withhold Illinois tax, you should be making quarterly estimated tax payments to Illinois.

"additionally I also get lodging and food money back"

How do you get the lodging and food money? Is it a fixed amount, or do you report your actual expenses to your employer? Do you get a separate check for expenses or is it included in your pay?

If the reimbursement is paid through an accountable plan you don't put it on your tax return, and you don't pay tax on it. The plan would have to be established by your employer. An accountable plan would generally require you to submit expense reports with receipts, but that might not be required if the plan meets the requirements for per diem reimbursement. Reimbursement from an accountable plan would not be included in the amount on your W-2.

If the reimbursement is not through an accountable plan, it's just additional pay, no matter what the employer calls it. It should be included in the wages on your W-2 and you pay tax on it the same as any other pay.

N

Natalie02dAuthor

Thanks you for the info!

To answer your question, yeah it is a fixed amount and they do pay it separately. My paycheck pays out every other week and when I turn in my service sheet (at the end of the month when I travel back home) they reimburse the over nights. I do not need to provide receipts expect for gas.

Also, I checked out my W-2 from last year and my pay stubs. There isn’t anything pulled out for Illinois, only taxes for the school district I live in, the town where the company is located and Ohio state tax.

Do I need to contact my company with this info and request a new W-2 for the last years? Or am I supposed to file separately in Turbo tax after I receive my W-2?

rjs

It's too late to change your W-2s for 2023 or earlier. For 2024, even though your employer has been withholding for the wrong state all year, they could still correct it for this year, so that your W-2 would be correct. They might give you a hard time about doing it, or say that they can't do it. They might even try to convince you that what they are doing is correct.

Here's what should be happening. Since you work in Illinois, they should be withholding Illinois state income tax and not Ohio state tax. Your W-2 should have a line of state information with IL in box 15, your total wages in box 16, and the Illinois tax that was withheld in box 17. You file an Ohio resident tax return and an Illinois nonresident tax return. Both state tax returns will show tax on your Illinois income, but you will get a credit on your Ohio tax return for part or all of the tax that you pay to Illinois.

I don't know how the Ohio school district tax works. @Hal_Al will be able to explain that. You might have to have a separate OH line on your W-2 for just the local tax.

From the way you describe the expense reimbursement, it sounds like it might be an accountable plan. Ask the accounting department specifically if that's what it is. If so, the expense reimbursements should not be included in the amounts on your W-2, and you don't put anything on your tax return about the expenses.

If you want to go back and correct earlier years, for each year you would have to file an amended Ohio tax return and a new Illinois nonresident tax return. You would get a big refund from Ohio, and have to make a large payment to Illinois, plus penalties and interest for filing and paying late. You can probably do this for 2021, 2022, and 2023. The problem you would have is that your W-2s show all your income as Ohio income. If you file an amended Ohio return saying that it's not Ohio income, Ohio is going to say you're wrong, and they won't pay the refund. To prove that it's Illinois income you would probably need a letter from your employer saying that you worked in Illinois and the W-2s are wrong, or a corrected W-2 for each year showing the Illinois wages and zero in box 16 for Ohio. I expect that you would have trouble getting that kind of proof from your employer. Since Illinois hasn't challenged it (yet), it might just be better to let sleeping dogs lie, even though it's wrong, but do it correctly going forward. But legally, you should correct the past years. You might want to ask a local tax professional for help in dealing with this.