Residency is in Indiana, but worked in Michigan. How do I mark both state forms to get reciprocal taxation?

Forum|Forum|7 years ago
June 4, 2019
5 replies
64 views

Last year Michigan full refunded the state withholdings, but this year is not. Both Indiana and Michigan are fully taxing the income. I feel I've made an error in information I provided, but can not determine this error. The Michigan form shows non-resident. Is this not enough?

TurboTax Deluxe Windows

Best answer by DanielV01

You do have another step. Since you live in Indiana, and Michigan and Indiana have a reciprocal agreement, none of your income is taxable in Michigan. On the Michigan non-resident return, you will encounter a screen that says Michigan Wages. There will be a box, and a number beside the box. You will type a zero in that box, because none of your income is taxable to Michigan state. Local taxes, however, are not covered by the reciprocal agreement. If you have Michigan local taxes withheld, and these are not refunded, there is a procedure to receive a credit on your Indiana return for these as well. Notice the following instructions:

Make sure on the W2 screen (on the Federal side of the return) that the local tax information in boxes 18-20 is associated with Michigan.
Make sure (on the Indiana return) you fill out the correct residency information, including your count of residency and Out of state, Michigan as your county of employment.
After several screens, you will come to a screen titled: Take a look at Indiana credits and taxes.
Under the subheading Personal, home, and family credits, click the Start box for Credit for Non-Indiana Local Taxes.
Click Yes on the next screen.
Fill in the appropriate information from your W-2 on the next screen entitled Credit for Non-Indiana Local Taxes.

You will then be credited for the amount you might have paid to the Michigan locality up to the amount you are taxed in your Indiana county on this same income.

Also note that you do not have to have Michigan taxes taken out of your income. They are not supposed to tax you. You may tell your employer that you wish to have him/her stop withholding Michigan state taxes because you live in Indiana. They can provide correspondence to the state to stop withholding to Michigan state.

DanielV01Answer

Level 15

You do have another step. Since you live in Indiana, and Michigan and Indiana have a reciprocal agreement, none of your income is taxable in Michigan. On the Michigan non-resident return, you will encounter a screen that says Michigan Wages. There will be a box, and a number beside the box. You will type a zero in that box, because none of your income is taxable to Michigan state. Local taxes, however, are not covered by the reciprocal agreement. If you have Michigan local taxes withheld, and these are not refunded, there is a procedure to receive a credit on your Indiana return for these as well. Notice the following instructions:

Make sure on the W2 screen (on the Federal side of the return) that the local tax information in boxes 18-20 is associated with Michigan.
Make sure (on the Indiana return) you fill out the correct residency information, including your count of residency and Out of state, Michigan as your county of employment.
After several screens, you will come to a screen titled: Take a look at Indiana credits and taxes.
Under the subheading Personal, home, and family credits, click the Start box for Credit for Non-Indiana Local Taxes.
Click Yes on the next screen.
Fill in the appropriate information from your W-2 on the next screen entitled Credit for Non-Indiana Local Taxes.

You will then be credited for the amount you might have paid to the Michigan locality up to the amount you are taxed in your Indiana county on this same income.

Also note that you do not have to have Michigan taxes taken out of your income. They are not supposed to tax you. You may tell your employer that you wish to have him/her stop withholding Michigan state taxes because you live in Indiana. They can provide correspondence to the state to stop withholding to Michigan state.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

L

Liz T

Level 2

I have a similar situation to this. Live in Indiana, work in Ohio...I have always had two W2 forms with local taxes paid for Indiana and then again for Ohio local but I only saw the option to get a credit for those not refunded this year. 1) how do I see or know if they were refunded? and 2) if they weren't, can I get them refunded or credited for prior years as well?

Hal_Al

Level 15

You can NOT get the OH local (city) tax refunded*. The OH-IN reciprocity agreement does not apply to local city taxes. You are not required to file a local city return, but you are also not entitled to a refund of the city withholding (box19 on your W-2), unless there was an error in the amount.

Most IN counties (but not the state) allow a credit, or partial credit for tax paid to an OH city. That will come up in the IN state interview. (For details, see:

https://ttlc.intuit.com/community/state-taxes/discussion/i-see-no-separate-question-for-school-taxes...

*In the unlikely event that Ohio School District tax was withheld, rather than city tax, you can get that refunded.