I did my federal and state income taxes this year using one of the websites linked from the irs.gov site. The federal went great, but the state wasn’t as smooth. It suggested a deduction that didn’t make sense to me. I looked in the state book and on the state website, but I couldn’t confirm that the deduction was correct. Since it was April 14th, I decided to play it conservative , not claim the deduction, and file my taxes. I am now, however, following through and making sure that I filed correctly.
Here is the item: Last year, we took a pay-out from a deceased in-law’s IRA. The website for the federal taxes included the money as part of our adjusted taxable income. The website for the state tax grabbed the adjusted taxable income, but in a later step, subtracted the value of the IRA distibution from the state’s taxable income. I would be surprised if the state didn’t claim income tax on that pay-out. Are there any cases where this might be correct?
The state taxes are for Illinois.
Any answers or pointers to sources of information would be appreciated. Also, any advice I receive will be considered non-authoritative and I will consult with a tax professional before proceeding.