Ed: Saw your comment, thank you. The short answer (a rough simplification), seems to be that you pay PA income tax for income made in PA. You pay IL income tax for income made in IL, not income made across both states. And you make sure the IL amount paid is correct via a credit calculated on Schedule CR.
It looks to me (bear with me, I am no expert on tax law in IL, PA, or in general, so consult a professional for "good" advice :), like you basically do this on Schedule CR:
- Figure out how much IL tax you would have paid if you pretend all your income were made in IL, including the paycheck in question.
- Figure out what % of your annual income was actually made in PA, assuming you paid taxes to PA on that part of your income.
- Make some other adjustments as requested by the form.
- Figure out how much of your tax bill to IL is based on that % that you actually made in PA.
- Get a credit for that amount (#4).
It looks like there may be some more pertinent info on Publication 111, so that may potentially change the math a bit too.
This check is 2014 income, during which you are a resident of IL. It's income from a PA employer.
You must file a tax return in PA regardless, since you "earned income in PA". Did your former employer withhold PA income taxes on this particular paycheck?
I'm not seeing where it says you should not include tax withheld; could you please point that out? Perhaps they mean you should only include tax actually considered "due" on the PA tax return.
From IL's Schedule CR instructions:
What is the purpose of Schedule CR?
Schedule CR, Credit for Tax Paid to Other States, allows you to
take a credit for income taxes you paid to other states on income
you received while a resident of Illinois. You are allowed this credit
only if you filed a required tax return with the other state. You must
use information from the tax return you filed with the other state to
complete Schedule CR.
What taxes qualify for the credit?
Taxes that qualify for the credit are income taxes you paid to another
state of the United States,