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I moved from PA to IL at the very end of 2013. Because of this I thought my taxes were going to be easy, but I received a final check in January 2014, which included unused vacation time, etc., and as a result have a 2014 W2 form from my previous employer in PA.

To which state do I pay income tax on that amount?

It was earned while a resident of PA but paid while a resident of IL and appears on a W2 for a year for which I was an IL resident 100% of the time.

I was going to file a non-resident PA state return and request a credit from IL, but the IL Schedule-CR instructions say not to include tax withheld (what's the difference how the other state gets its taxes?), so now I'm not sure what to do.

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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:

  1. 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.
  2. Figure out what % of your annual income was actually made in PA, assuming you paid taxes to PA on that part of your income.
  3. Make some other adjustments as requested by the form.
  4. Figure out how much of your tax bill to IL is based on that % that you actually made in PA.
  5. 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,

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  • On the Schedule CR instructions linked above, page 4, the "Note" under the instructions for "Line 51": "Do not enter the tax withheld from your Form W-2 on Line 51 unless you are including tax paid to a city or local government that does not require you to file a tax return." Line 51 is where you enter taxes paid to the other state.
    – Steve
    Apr 14, 2015 at 21:06
  • And, yes, my PA employer withheld federal, state, and local taxes.
    – Steve
    Apr 14, 2015 at 21:07
  • Yes, I read Publication 111 (not very helpful, mostly said "read instructions on CR") and filled out Schedule CR. You basically calculate a percentage, then compare it with the tax you paid and take the min(). The part that bothers me is if I'm not allowed to say that withheld tax is paid, then my credit is $0, which doesn't make sense. Oh, unless they mean "don't simply report withheld, report the actual tax paid," which in my case happen to be exactly the same amount.
    – Steve
    Apr 15, 2015 at 3:03

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