Will I have to pay state taxes if I didn't work but had interest income?

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Rhadamanthus
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Will I have to pay state taxes if I didn't work but had interest income?

Post by Rhadamanthus »

I moved from WA To IL last month and have not yet worked at a job in this state, though my job search is nearly done (I have one offer in hand and likely two more on the way, for a probable start date in January or February, so no year overlap). However, I do have interest income from my Ally bank accounts. Washington doesn't have a state income tax but Illinois does, so despite not having W-2 income, will I still need to file with Illinois because of the Ally interest? The total interest earned is only about $60.
nalor511
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by nalor511 »

Calygos wrote: Sat Dec 22, 2018 5:42 am I moved from WA To IL last month and have not yet worked at a job in this state, though my job search is nearly done (I have one offer in hand and likely two more on the way, for a probable start date in January or February, so no year overlap). However, I do have interest income from my Ally bank accounts. Washington doesn't have a state income tax but Illinois does, so despite not having W-2 income, will I still need to file with Illinois because of the Ally interest? The total interest earned is only about $60.
You will have to file with IL if you meet their definition of tax resident (almost certainly, since you moved there). https://www2.illinois.gov/rev/individua ... dents.aspx
Topic Author
Rhadamanthus
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by Rhadamanthus »

nalor511 wrote: Sat Dec 22, 2018 6:13 am
Calygos wrote: Sat Dec 22, 2018 5:42 am I moved from WA To IL last month and have not yet worked at a job in this state, though my job search is nearly done (I have one offer in hand and likely two more on the way, for a probable start date in January or February, so no year overlap). However, I do have interest income from my Ally bank accounts. Washington doesn't have a state income tax but Illinois does, so despite not having W-2 income, will I still need to file with Illinois because of the Ally interest? The total interest earned is only about $60.
You will have to file with IL if you meet their definition of tax resident (almost certainly, since you moved there). https://www2.illinois.gov/rev/individua ... dents.aspx
This is interesting! I think I may not qualfy as even a part-time resident for tax purposes:
Part-year resident – You established Illinois residency during the year or were an Illinois resident, but established residency in another state during the year.

Example: During the year David moved to Illinois from Missouri. He registered his car in Illinois, got an Illinois driver’s license and registered to vote in Illinois. Therefore, David is a part-year Illinois resident.
So while I moved from WA to IL, I sold my car in WA before moving and I haven't yet gotten an IL driver's license or registered to vote here.
Jordan4FI
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by Jordan4FI »

I would not file with IL, you are more like on a term stay with the option to stay with a job offer... you have not really shown intent to be a resident..

You also would not be present in IL for 183 days...
lstone19
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by lstone19 »

Calygos wrote: Sat Dec 22, 2018 6:27 am This is interesting! I think I may not qualfy as even a part-time resident for tax purposes:
Part-year resident – You established Illinois residency during the year or were an Illinois resident, but established residency in another state during the year.

Example: During the year David moved to Illinois from Missouri. He registered his car in Illinois, got an Illinois driver’s license and registered to vote in Illinois. Therefore, David is a part-year Illinois resident.
So while I moved from WA to IL, I sold my car in WA before moving and I haven't yet gotten an IL driver's license or registered to vote here.
THose are examples of what could be used to show you are a resident. Not doing those specific things does not mean you are not a resident. Given the facts you have presented, you are either a resident of Washington or a resident of Illinois on any given day of this year. If you claim you are not yet an Illinois resident, then you are saying you are still a Washington resident. So other things that would be considered are where are you living in Illinois? Did you lease and apartment of buy a home? What has happened to where you were living in Washington? Did you end a lease or sell a home?

The good news is with only $60 in Illinois income, you are probably below the minimum to pay any income tax and I think, to need to file. But not owing or not needing to file is completely separate from whether you have yet renounced Washington residency and established Illinois residency.
lakpr
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by lakpr »

Given the facts you presented, if I were you, I’d claim no residency in IL for 2018. Sounds like you came to IL in search of a job, and your job will start only in 2019. If you were unable to land a job, quite likely you would have returned to Washington. If you landed a job in another state, quite likely you would have left the state. Not changing your DL, not buying a car, not registering to vote in IL can all be shown as non-intent to establish residency.
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Rhadamanthus
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by Rhadamanthus »

lakpr wrote: Sat Dec 22, 2018 8:36 pm Given the facts you presented, if I were you, I’d claim no residency in IL for 2018. Sounds like you came to IL in search of a job, and your job will start only in 2019. If you were unable to land a job, quite likely you would have returned to Washington. If you landed a job in another state, quite likely you would have left the state. Not changing your DL, not buying a car, not registering to vote in IL can all be shown as non-intent to establish residency.
lstone19 wrote: Sat Dec 22, 2018 8:16 pm THose are examples of what could be used to show you are a resident. Not doing those specific things does not mean you are not a resident. Given the facts you have presented, you are either a resident of Washington or a resident of Illinois on any given day of this year. If you claim you are not yet an Illinois resident, then you are saying you are still a Washington resident. So other things that would be considered are where are you living in Illinois? Did you lease and apartment of buy a home? What has happened to where you were living in Washington? Did you end a lease or sell a home?

The good news is with only $60 in Illinois income, you are probably below the minimum to pay any income tax and I think, to need to file. But not owing or not needing to file is completely separate from whether you have yet renounced Washington residency and established Illinois residency.
All good points. FWIW, I did rent an apartment here and fully intended to stay until I found a job, as I came here to be near family. I normally do my taxes through TurboTax Online since they're usually really simple, but to be certain, I decided to run the question by my estate attorney. We'll see what he says, as he could do my taxes as well if I want. I can't believe I didn't think to ask him in the first place.
furwut
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by furwut »

All good points. FWIW, I did rent an apartment here ...
My thoughts too. Signing a lease and occupying an apartment is clearly establishing residency.
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RickBoglehead
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by RickBoglehead »

Your attorney's answer will cost you more than any tax...

You are an Illinois resident.
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lstone19
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by lstone19 »

There are no cut-and-dry answers as some of this is based on intent and only you know what your intent is. And $60 in income is very unlikely to make it worth Illinois' effort to challenge if they think you filed incorrectly. And sometimes you'll find states have different definitions of residency such that you meet both state's definitions.

My story, from 21 years ago so outside any statute of limitations: In June 1997, I accepted a job transfer that would have us move from California to Illinois. I started working in Illinois that month living with a relative. In August, we sold the California home and closed on a house in Illinois and I and my son (just short of 4 y.o. at the time) started living there full-time. Clearly my son and I had renounced California residency and established Illinois residency. But my wife continued to work for her California employer. To make it more complicated, the California employer at about the same time moved so the old California house wasn't even a suitable place to live if we had not sold it. And as she only planned to stay with them six more months on a project, she stayed in a hotel when in California. Due to my job (airline with flight benefits), it was in our interest that she still be considered a California resident until leaving that job (flight benefits could be used from her residence to visit me (leisure travel) but not from her residence to a job).

At this point, I discovered the interesting world of how tax residency is established along with its related concept, domicile. California allowed that domicile and residence could be different; Illinois did not saying your domicile is your residence. I have forgotten much of the details but reading their different definitions led me to the conclusion (without professional advice) that both states could claim my wife was a resident and want to tax her income as a resident (no way we were paying both states as residents). My conclusion (as it met our needs) was that while my wife intended to make Illinois her permanent home, she had not yet established tax residency in Illinois until she left the California job and started living in the IL home all the time and looking for a job in Illinois. Selling the house in California, while normally a sign of abandoning residence there, could be justified due to her employer's move. And as a result, in both 1997 and 1998, we did complicated state tax returns that had me moving in 1997 and my wife moving in 1998. They were never questioned.
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Re: Will I have to pay state taxes if I didn't work but had interest income?

Post by grabiner »

lstone19 wrote: Sun Dec 23, 2018 8:06 am At this point, I discovered the interesting world of how tax residency is established along with its related concept, domicile. California allowed that domicile and residence could be different; Illinois did not saying your domicile is your residence. I have forgotten much of the details but reading their different definitions led me to the conclusion (without professional advice) that both states could claim my wife was a resident and want to tax her income as a resident (no way we were paying both states as residents).
In most cases, even if two states consider you a resident, you can take a credit for double-taxed income. If you are a resident of state A and earn income in state B, you can take a credit for state B tax against state A tax, even if state B considered you a resident. (This doesn't always work for income from intangible assets, such as investments. Some states only allow a credit if the income is sourced to the other state, and if both states work this way, there will be no credit on income which both states claim.)
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