If I worked remotely from another state for 3 months, do I need to file in both states?

Question

I live and work in Illinois. From March 15, 2020 to May 30, 2020, I worked remotely from Indiana for a company domiciled in Illinois. I'm trying to figure out if I need to file for Indiana.

Looking at Indiana's income tax overview, they recognize 3 filing statuses, and this is the one that seems like it would apply to me:

Full-year nonresident – You are a full-year resident of a state (or country) other than Indiana.

Part-year resident – You established Indiana residency during the year.

The example they give for part-year resident involves someone moving to Indiana in the summer and registering for a driver's license. I didn't register for anything in Indiana, so under these definitions it seems like I would fall under Full-year nonresident.

On the same page, there are two relevant sentences under Part-Year Residents and Full-Year Nonresidents.

If you were a part-year resident and received income while you lived in Indiana, you must file Indiana Form IT-40PNR, Part-Year Resident or Nonresident Individual Income Tax Return.

Well, I didn't receive income from Indiana while I worked remotely from there since the company was in Illinois, so this doesn't apply to me.

If you were a legal resident of another state (exception: see Full-Year Residents of Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin below) and had income from Indiana (except certain interest, dividends, or pension income), you must file.

I didn't have income from Indiana but I did receive income from the company domiciled in Illinois while I was temporarily working remotely in Indiana.

Based on taking these statements, it would seem that I don't have to file for Indiana - what do you think?

Answer 1

Because you lived in Illinois, then the key is what is Indiana-sourced income.

I went to the instructions for IT-40PNR Part-Year and Full-Year Nonresident

Nonresidency and Income Taxable to Indiana

A part-year resident owes tax on taxable income received from all sources while being a resident of Indiana. A part- or full-year nonresident also owes tax on income from Indiana sources as listed below while a legal resident of another state.

Indiana income includes income from the following sources:

1. Winnings from Indiana riverboats, pari-mutuel wagering, and lotteries;
2. Labor or services performed in Indiana, including salaries, wages, tips, commissions, etc.;
3. A farm, business, trade or profession doing business in Indiana;
4. Any personal property located in Indiana;
5. A partnership or an S corporation doing business in Indiana;
6. Stocks, bonds, notes, bank deposits, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other property where earnings are a part of an Indiana business;
7. Trusts and estates given to nonresident heirs; and
8. Pensions and most interest and dividends are taxed by your state of residence when you receive them.

Note. If you were a full-year nonresident and your only income from Indiana sources was from pensions, interest and/or dividends (which were not a basic part of the business in Indiana) and/or unemployment compensation, you are not required to file an Indiana income tax return.

Item #2 appears to apply to you. You did the work while you were located in Indiana.

Check the state websites to see if they will make an exception for work during COVID.