I've filed state taxes before with no problem, but I seem to have hit a bump this year. I got a new job where the corporate office is in Iowa, while I work at the office in Illinois (and live). When I started doing my Illinois state taxes, it ended up that I was to owe $550 some dollars. I have never owed before and always claim 0 so they take out more than necessary on my taxes. I glanced back at my W-2 form that was sent to me, and the state code on it is for Iowa. Does that mean that they are just taking out taxes for Iowa and not Illinois? I'm just really confused on what's going on and not sure how to proceed.

It seems your employer screwed up. You should NOT have IA taxes withheld, as you neither work nor live there. And as you are aware, you absoultely do need to continue paying IL. So your actions plan is:

1. File a non-resident income tax return with IA, showing $0 IA income and the taxes withheld, and you should get a full refund.

2. File your tax return with IL. You will have to pay the full amount yourself - due by April 15. You may actually owe a penalty for underwhithholding of taxes in 2009.

3. Have your employer immediately stop withholding IA taxes and start withholding IL taxes. If they can't do that (for example, if they don't have an IL tax ID number), then they should still not withhold IA taxes, and instead you would have to file estimated tax payments with IL each quarter, starting this April - otherwise you will have a peanlty from IL for under-witholding in 2010.