“Is this income taxable in Illinois as a full-time resident of Illinois in 2011 or is it taxable in Arziona? Or is it taxable at all?”----->So, you became a full year resident of IL in 2011 as you said, unfortunately, unemployment benefits count as taxable income on your federal return, but they're not necessarily taxed by your state. However, in IL and AZ , all of your unemployment benefits are taxable by both the state and federal governments, including any dependency benefits you may receive. Since there is no State Tax Reciprocal Agreement between IL and AZ, you, as a full year resident of IL, need to file AZ return, as a nonresident of AZ on your AZ unemployment benefits(AZ unemployment benefits are taxable income to both the federal and state governments) to AZ and need to file your IL return to claim AZ tax that you paid to AZ on your AZ unemployment benefits on your IL return. |