MI/IL Tax Return

Forum|Forum|5 years ago
February 1, 2021
5 replies
34 views

I work in Illinois but am a full time Michigan resident. When I fill out the MI tax return, I am paying the full tax rate on my income in Michigan. I have taxes withheld by my employer in Illinois and Michigan. When I fill out the Illinois non-resident tax form, it also requires that I pay the full state tax amount on the same income. Since Illinois and Michigan have a reciprocal tax agreement, I thought I would only pay income tax in Michigan. Why am I double taxed on this income?

JotikaT2

Alumni - Expert

You are correct. Michigan and Illinois have state reciprocity.

What is state reciprocity

However, your employer should not be withholding any state income taxes for Illinois. The state reciprocity allows you to report all of your wages within Michigan and only pay taxes there.

If your employer is still withholding taxes in Illinois, complete and submit the form in the link below to your employer to ensure they only withhold state income taxes for Michigan.

Illinois state reciprocity withholding form

For 2020, since you had income taxes withheld from both states, you will need to prepare a Nonresident state income tax return for Illinois, and a Resident state income tax return for Michigan.

If you follow/review the steps below, your return will calculate the credit in Michigan for any taxes paid in Illinois on the same income.

To ensure your return is calculated correctly, you will need to confirm a few items:

In the My Info section of TurboTax, confirm that you have entered the correct state information:

Click Edit to the right of your name
Confirm your input under #2 Tell us the state(s) you lived in
Go back to the personal information section, and verify the mailing address and "Other state income" section.  Be sure to answer yes to the question asking "Did you make money in any other states?".

Please note the following as it will affect the calculations:

Make sure you prepare the Nonresident Illinois state tax returns first. Be sure to answer the questions correctly to ensure only income sourced to that state specifically are reported.

Once you have entered all of the nonresident state information, then start your Michigan resident state tax return.  This will ensure you receive any credits for taxes on income which may have been taxed in Illinois.

Proceed through the screens in your Michigan return until you see Take a look at Michigan credits and taxes. You should see Taxes Paid to Another State under the Credit for Taxes paid. You can edit your information here if needed but the taxes paid to the other state should be listed in this section.

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DProgress

Level 2

I have the same situation. If I entered my Michigan resident tax information before my Illinois non-resident tax information, how do I reverse this? Do I have to start all over? Isn't this a bug in Turbotax that ought to be corrected? My Michigan information has never changed from past years whereas the Illinois non-resident situation is something new that has been added this year.

MaryK4

Level 15

You do not have to start again- just do the nonresident Illinois return THEN go back through the Michigan return. Because you get a credit in your RESIDENT state for the nonresident tax paid, TurboTax does not know how much the NONRESIDENT tax for the credit is until you do the nonresident return.

@DProgress

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