In phpStorm see Settings -> PHP -> Test Frameworks -> Test Runner. Check if you have default configuration file phpunit.xml checked. No need to change anything in this file.
Create .env.testing and copy whole DB_ block from .env (not just parts that are different). Change values to your test database values.
Then run php artisan config:clear which will clear configuration cache.
Everything should work 🙂
I spent several hours figuring it out. Hopefully you don’t.