State tax filing

Follow these steps:

1. Open your return to NY state
2. Proceed to You Just Finished Your NY Return
3. Locate Credits and Other Taxes Section, start
4. Scroll down to credit section and select Taxes Paid to Another State. 
5. Continue
6. Use dropdown box to select state, continue
7. Enter portion of NY income taxed by IN in the boxes, continue through entering correct amounts
8. Tax computed on your IN return, enter the tax liability shown on your IN return, continue. (Look at your IT-40NPR, line 11)
9. Enter IN information, enter amount paid by you, on your behalf, continue
10. Enter IN information, enter tax withheld, refund, balance due, continue
11. Credit for tax paid is shown. Do you want to attach return? I recommend answering yes here.
12. Done

Let me explain how NY taxes. For a resident, he state adds up all income from everywhere and determines the tax liability on that amount. Then it gives credit for tax paid to other states on the same income. You can look at IT 201 line 38 and see your full taxable income with tax liability below it. Line 41 shows IT 112R credit with the amount you just entered. It is subtracted from your tax liability.