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sunny_2005 · Jan 20, 2009, 10:14 AM

I am on H1-B , working in the US from feb.2007. My only dependent, my wife is on H4. Though I am paying taxes as per Illinois, I am working at my client place in MA. I have never been the resident of Illinois during the entire year. My questions are?

1. What is the procedure to file taxes in IL?

2. which forms should I fill? Which category would I fall into?

3. In order to get maximum refund based on exemptions/dependents, what number should I mention on my W-4? I have mentioned 3 as of now, Can I still change it? If yes, will it be a problem?

AtlantaTaxExpert · Jan 20, 2009, 11:41 AM

1 & 2) You need to file an Illinois tax return as a non-resident and claim a full refund for all Illinois taxes withheld. Illinois has no legal standing to collect taxes on income earned in Massachusetts.

You also need to file a MA tax return to pay taxes to Massachusetts. Attach a copy of this return to your Illinois return to show Illinois tha you are paying Massaachusetts state taxes.

Have your employer STOP withholding Illinois taxes and START withholding Massachusetts taxes.

3) Under IRS withholding regulations for foreign nationals, you can only claim 2 or 1 or zero exemption. You CANNOT claim THREE. You should claim TWO to minimize your withholdings, because ANY refund from the IRS or the state of Massachusetts is an interest-free loan to those governments.

sunny_2005 · Jan 20, 2009, 12:02 PM

Thanks for your reply buddy.

My next question is, for the exemptions in W4, I have 3 on it.

What are my options now? What are the implications?

Can I change it now? Whether yes or no, what are the effects of doing so?

Please advice.

AtlantaTaxExpert · Jan 21, 2009, 10:29 AM

If your employer allows you to claim three exemptions, then continue to do so.

It should direct enough withholding to cover your tax liability and have you get a small refund, which is your desired goal.