Tax Experts: Are dividends from a mutual fund taxed by state of ILL?

[jjj70095]

I have some money market dividend income from a Charles Scwabb (form 1099Div) money market account.

My tax person added the amount to my income for my ILL state tax return, but when I google dividends in Illinois, it says they are not taxable by the state.

 

[garageguy]

Im thinking taxable

 

[united]

I do not know. But somehow it seems like income, I do not see how it could not be taxable. I did do the google search for IL and it does seem confusing. I would say it most likely is qualified as "business dividend income", which is taxable. Maybe contact Schwabb (they work for you right) or get a second opinion somewhere else and of course wait for someone here on JD to answer.

 

[gary_in_neenah]

I know we have some CPA's on here as members so hopefully they'll have some answers. Here in Wisconsin, You Betcha they tax the dividends. Capital Gains too. Income, Pensions, Property, Dog License, the list is endless!

 

[jjj70095]

This is the confusing part.....the dividend from Charles Schwab mutual fund is not a business in Illinois......

Dividend income you received, other than business dividend income, is not taxed by Illinois. Business dividend income you received as part of a business conducted in Illinois is taxed by Illinois.

 

[jjj70095]

Wait, since CS "does business" in Illinois, I see why it is taxable income. If that is my only source of income in Illinois that is taxable (I am retired), how does one go about having the state withhold tax on it?????

 

[ddhanna]

My guess.... Dividends are added as income to your federal return as they are taxable there. You then transfer your income from federal to the state return. If it is not taxable in Illinois (don't know), there will be a mechanism on the Illinois form to exclude it. In Wisconsin, it is definitely taxable. Your tax guy's software should handle everything.

 

[ddhanna]

Wait, since CS "does business" in Illinois, I see why it is taxable income. If that is my only source of income that is taxable (I am retired), how does one go about having the state withhold tax on it?????

If you got a 1099Div, it is your personal dividend income. If you want to withhold tax, it would be done by Schwab, at your request, if they offer that service. Some do, some don't. Because Schwab does business in your state does not matter. I personally would trust my tax guy or find a new one.

 

[pclark]

It is considered income which is taxable.

 

[ddhanna]

Probably in Illinois. States with No Income Tax (e.g., Florida, Texas, Nevada, etc.) do not tax dividends at all.

 

[jjj70095]

I called Schwab and they can not withhold state tax for ILL. But I can withhold state tax for ILL when I do my legal IRA withdrawls in a few months, so will take out tax there for these dividends.

 

[garageguy]

Illinois will want to tax everything you got or own.

 

[ddhanna]

I called Schwab and they can not withhold state tax for ILL. But I can withhold state tax for ILL when I do my legal IRA withdrawls in a few months, so will take out tax there for these dividends.

Income from an IRA is tax deferred (federal and state) and not realized until the year it is paid. Don,t understand why you would owe ILL tax unless you have realized some of this income in 2024. Or you have multiple accounts with Schwab, both taxable and untaxable and you are looking at a consolidated 1099?

 

[jjj70095]

I have 2 accounts with CS. Regular brokerage which is where i get the dividends where ILL tax is owed.

Also have regular IRA, that I have been withdrawing early equal amounts (72T plan) with no penalty for the last 25 years. Will be 59.5 in April and can withdrawl any amount out of IRA, need to pay both fed and state taxes on the withdrawls I make come April. Made over $100k on apple stock through the years in the IRA. Illinois does not tax state pension income.