You can go back to the W2 and delete the state line if there is no state tax withheld. Delete all state information. Your W2, state section is marked with MI so DFAS is letting MI know you earned money and to expect a tax return from you. I would not expect MI tax withheld since active duty is exempt from taxes.
Your HOR is MI, I take it. You must file a MI return. Military Personnel MI:
- Residents. Residents entering military service remain Michigan residents for income tax purposes, regardless of duty station, until a change of legal residence has been made
- Nonresidents. Nonresidents stationed in Michigan must file if they have earned income from Michigan sources other than military pay.
- Sch 1 to subtract active duty military pay
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