- Instruction Year: 2023
Iowa's only income tax reciprocal agreement is with Illinois.
Any wages or salaries earned by an Iowa resident working in Illinois are taxable only to Iowa and not to Illinois. Any wages or salaries earned by an Illinois resident working in Iowa are taxable only to Illinois and not to Iowa.
Iowa will tax any Iowa-source income received by an Illinois resident that is not from wages or salaries. Illinois may tax any Illinois-source income received by an Iowa resident that is not from wages or salaries.
Iowa gambling winnings and unemployment compensation for employment in Iowa are examples of income that are not wages and salaries and, therefore, not covered under the Iowa-Illinois Reciprocal Agreement.
Iowa Resident Working for Wages or Salary in Illinois
An Iowa resident working for wages or salary in Illinois should complete and file Illinois form IL-W-5-NR Employee's Statement of Non-residence in Illinois with the employer so that the employer will withhold Iowa income tax.
Illinois Resident Working for Wages or Salary in Iowa
An Illinois resident working for wages or salary in Iowa should complete and file the Employee's Statement of Nonresidence in Iowa, 44-016 with the employer so that the employer will withhold Illinois income tax.
Tax Withheld in Error
If Illinois income tax has been mistakenly withheld from the wages or salary of an Iowa resident, the Iowa resident must file an Illinois income tax return to get a refund. Any questions on how to complete the Illinois return should be directed to the Illinois Department of Revenue at 800-732-8866.
Illinois residents who had Iowa income tax withheld in error from their wages and have no other Iowa-source income must file an Iowa income tax return requesting a refund. They should complete IA 1040, Steps 1, 2, and 3, show “0” on IA 1040, lines 1, 4, and 20, write “Illinois resident tax withheld in error” on the face of the return. Enter the Iowa tax withheld on IA 1040, lines 28 and 30 through 32. Sign the return and include copies of all W-2s with the return. Copies of federal and Illinois returns must be included.