Going forward, you can avoid that scenario by simply spending fewer than 183 days in your “temporary” state—Illinois, in our example—which could mean going back to your domicile for the required length of time or even spending a few weeks somewhere else altogether.
You can claim exemption from withholding only if both the following situations apply: For the prior year, you had a right to a refund of all federal income tax withheld because you had no tax liability. For the current year, you expect a refund of all federal income tax withheld because you expect to have no liability.
Illinois Nonresidents As an Illinois nonresident, you must file an Illinois return if: You earned enough taxable income from Illinois to have a tax liability.
Create a MyTax Illinois account to be able to register your business and remit taxes if you haven't already done so. Register as a new employer using the New Business Registration application (Form REG-1) on MyTax Illinois. This will create a withholding account with the Department of Revenue.
An employer that pays wages or other compensation to employees for services performed within IL State is required to register with the IL Department of Revenue for a withholding account. Register using the MyTax Illinois website: .
If it's for the employee's convenience, generally tax withholding should be for the state where the business is located. If it's a necessity, then tax withholding should be for the employee's state of residence.