I have received (2) 1099-Rs. One is for a loan that I defaulted when I left my company and moved out of state. The other is for the disbursement that I withdrew when I first arrived in my new state. I lived in PA for the first 4 months of 2007 and then moved to IL for the remainder of 2007. I'm not sure which state to file either. I was living in IL when I received the disbursement for money I withdrew. Does anyone know?

Where were you PHYSICALLY located when you received the disbursement?

Where were you PHYSICALLY located when the loan was declared in default?

Your physical location dictates which state gets to tax that income.

I was physically living in IL when I took out the disbursement. I even had them take out state taxes for IL because I was living there when. I thought it was correct to pay IL taxes on that.

As far as the loan default - I left my company at the end of April while I was still living in PA. A few days later I was living in IL. So would the loan have technically defaulted immediately after leaving my company or do you have a grace period?

The default became effective the date you left the company, UNLESS the company gave you a set period to pay back the loan.

You need to call the company's 401K custodian to find out if they gave you time to pay the loan before they declared it in default.

Great. Thanks for your help! I will definitely call them to find out if I had a grace period.

Glad to help!