do I need to file a Michigan non-resident return if I received unemployment compensation from Michigan

[M_C_C]

I live in Illinois, work in Michigan (remote from IL), with no Michigan tax withheld , I received unemployment compensation from Michigan with no tax withheld, do I need to file a Michigan non-resident return?  Thanks

[ErnieS0]

Yes. Michigan unemployment is taxable to MI. The state recognizes the $10,200 federal unemployment exemption so your MI unemployment may not be taxable but you still have to file a nonresident Michigan return if you are required to file a federal tax return.

Use this chart to determine if you are required to file Michigan Individual Income Tax return

[M_C_C]

Thanks for the reply.

I normally do not file a Michigan return when my only Michigan income is from my MI employer

because Michigan is a a reciprocal state of Illinois.

But in 2020, I received some unemployment compensation from the Michigan state and received a 1099 G from Michigan. So I am not sure if need to file a Michigan non-resident return because of this 1099 G. There was no tax withheld in the 1099G.

Thanks

[ToddL99]

Strictly interpreted, the chart posted above( Use this chart to determine if you are required to file Michigan Individual Income Tax return) indicates you have to file a MI non-resident return - only because you have have to file a federal return and have income "attributable" to MI..

Since you work in MI, your unemployment compensation comes from the state of MI (the MI unemployment insurance fund). That unemployment income is, therefore,  "attributable" to MI.

You probably won't owe any tax, since MI recognizes the federal decision to exempt up to $10,200 of 2020 unemployment compensation from taxation. 

FYI - The "failure to File" penalty in MI is based on your unpaid tax - it you don't owe any tax and don't file, your penalty will be "0"

From What are the penalty charges for failure to file or pay?: Penalty is 5% of the total unpaid tax due for the first two months or portion thereof. After two months, 5% of the unpaid tax amount is assessed each month. The maximum late penalty is equal to 25% of the unpaid tax owed.

[M_C_C]

Thanks Ernie.

From the link you provided, which category do you think applies to my situation?

(Use this chart to determine if you are required to file Michigan Individual Income Tax return)

It seems to me I fall into the category "a non-resident of Michigan who lived in a reciprocal state, no Michigan tax withheld from wages, no business activity in MI..."  Therefore, I only need to file an IL state return, not a Michigan return. Am I wrong?   Thanks

[M_C_C]

Sorry ToddL.  I did not see your post before I posted my last message.  Thanks for the response.

[M_C_C]

"Since you work in MI, your unemployment compensation comes from the state of MI (the MI unemployment insurance fund). That unemployment income is, therefore,  "attributable" to MI."

So the "reciprocal state" agreement does not apply in this case?   (I live in Illinois).   Thanks

[ToddL99]

Correct - the "reciprocal state" agreement does not apply in this case. 

Reciprocal state agreements apply to state tax withholding on wage income, not other forms of income. 

See What is a state reciprocal agreement? for details - all the provisions refer to employers, withholding and W-2 income.

A reciprocal agreement, also called reciprocity, is an agreement between two states that allows residents of one state to request exemption from tax withholding in the other (reciprocal) state. This can save you the trouble of having to file multiple state returns. 

[M_C_C]

Thanks Todd for the answer.

On a different topic, from the link " What is a state reciprocal agreement":

"TurboTax handles reciprocal states and will generate the correct state(s) based on your personal information and your W-2."

I do not think TurboTax handles this situation well.   I entered my unemployment compensation and my W2  in TurboTax and they are from Michigan.  I thought TurboTax should be able to decide whether I need to file a MI return. Instead, it makes a decision based on my answer to the question "whether I made money" in Michigan (which I do, I have both salaries and unemployment comp in MI), and that's confusing to me.

Again, Thanks for your answer.