In TurboTax, you start by preparing your federal tax return. You list all your worldwide income, no matter where it was earned. The internship is not self-employment income, because it was educational and it is exempt from self-employment tax. Because it was entered in box 7, TurboTax will try to make it self-employment income. I believe there is a checkbox on the screen after you enter the 1099 information that says something like, this was a “scholarship or Fellowship”. You should also answer the 1099 test questions all as no; this was not like your regular job, you were not trying to earn a profit, you will not be doing similar work next year. (because this is an educational fellowship, it is not considered “income earned from work“ and it is not considered “profit“, even though the money was nice to have.)
Then, you need a New York State nonresident return. You would indicate in TurboTax that you are a permanent resident of Michigan and that you were working temporarily in New York State for 10 weeks (less than 182 days or less than half the year). On the New York State nonresident tax return, you will only owe tax on income that was actually earned in New York State. If you were living or working within the borders of New York City, you will also owe city income tax.
Then, you need a Michigan full year resident tax return, on which you will pay income tax on all your worldwide income, including the income earned in New York. Michigan will give you a credit for the tax that you paid in New York State, so you mostly don’t get double taxed on the same money. The credit will flow automatically in TurboTax as long as you prepare the New York State return first and the Michigan state return last.
If this was your only income for the year, you may owe some New York State tax, because I don’t know what the standard deduction is for non-residents without looking it up. But you are probably not going to pay federal or Michigan state tax. If you had other income, then of course your tax would be determined by your overall income and deductions.
If your total income for the year is less than $36,000, you should use the IRS free file version of TurboTax rather than the standard version. To file multiple state tax returns using TurboTax online will probably cost over $100. The IRS free file version is free completely free and includes forms and situations that are not included in the free version of TurboTax. It is a separate website and you may need to make a new account and start over.
https://freefile.intuit.com
