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Level 2

Out of state student

My dependent 21 year old child is a full time student in IL, yet a resident of MI.  She has a part time job in IL and earned $14000.  Does she need to file both an IL(non-resident) AND a MI(resident) return?  Is there a way to reduce the large amount of tax she apparently owes to MI?

2 Comments
Employee Tax Expert

Out of state student

In general, nonresidents are taxed on income earned in that state and residents are taxed on all income regardless of where it was earned.  To avoid the double taxation of the same income, most resident states will give a credit for the tax paid to the nonresident state. 

See  How do I file a nonresident state return? - TurboTax® Support

Level 9

Out of state student

Unfortunately, since IL and MI have a reciprocal tax agreement, she cannot take a credit for taxes paid to IL.

 

Now...if she filed the proper forms indicating she was an MI resident, then the employer would either a) withhold MI tax....or b) just not withhold any IL taxes at all.  In that case she would not indicate she worked in IL and wouldn't file a IL tax return at all.

 

But if IL taxes were withheld, she has to file IL as a nonresident indicating zero IL income, (an IL-1040 with a schedule NR) to get all of the IL withholding returned..