I have a question about filling in income in Column B on Schedule CR IL-1040.

[frankzha]

My relative is an Illinois resident but worked in Detroit, Michigan last summer. Because of the reciprocal agreement between Michigan and Illinois, his wage is not taxed by the State of Michigan.  However, the Detroit City tax was withheld on the wage. 
He would like to claim it as a tax credit when filing his IL state tax return.  

On his W-2, his income is listed in box 16 as state wages, and in box 15, the state is IL.  Additionally, the income is also shown in box 18 as local wages, with box 19 indicating the locality as Detroit. Can he include this income in his IL Schedule CR, Column B, for the Non-Illinois Portion?

The following instruction in Schedule CR IL-1040 seems self-contradictory: 
"Line 1: Wages, salaries, tips, etc.
Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received. Do not include wages taxed by another state if they are also shown as Illinois wages. Also do not include any wages you received for working in Iowa, Kentucky,
Michigan, or Wisconsin while you were an Illinois resident, unless you paid tax to a city or county on these wages."

His wage shows as Illinois wages in his W-2, but he paid tax to a city in Michigan on this wage.  Should he follow instruction in
1) Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received?
Or
2) ...unless youpaid tax to a city or county on these wages?

If he follows (1), he should not enter his wage in column B on IL Schedule CR. However, if he follows (2), he should.

[RobertB4444]

He shouldn't take the taxes withheld as a deduction at all.  He should file a Michigan tax return as a non-resident and request a refund of the taxes.  They aren't taxes he paid, it's just money that was sent to Detroit on his behalf and he should file a tax return to ask for it back.

@frankzha 

[frankzha]

Thx for the reply!

Well, what's confusing is that the State of Michigan didn't withhold any tax. Due to a reciprocal agreement between Michigan and Illinois, only Illinois wages appear on his Federal and State copies of the W-2 form. However, the City or Local copy of the W-2 shows Local Wages and Local Income Tax withheld for the City of Detroit. Unfortunately, the City of Detroit does not seem to offer refunds or provide tax credits. This is the credit he would like to take, presumably via his Illinois tax return.

The Illinois Schedule CR IL-1040 Instructions indicate that a person can claim a credit for income taxes paid to another state or city on income received while being a resident of Illinois. However, the following instruction seems self-contradictory.

Here is the link to Illinois Schedule CR IL-1040 Instructions:

https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual...

On page 2, for Column B – Non-Illinois Portion, under Income, it says:

Line 1: Wages, salaries, tips, etc.

Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received. Do not include wages taxed by another state if they are also shown as Illinois wages. Also, do not include any wages you received for working in Iowa, Kentucky, Michigan, or Wisconsin while you were an Illinois resident, unless you paid tax to a city or county on these wages.

He received wages for working in Michigan but taxed as Illinois wages due to the reciprocal agreement, and he paid tax to the city of Detroit. The first sentence seems to indicate he should not enter his wages in Column B (and thus not receive credit), while the last sentence says he can because he paid tax to a city on the wages.

In his W-2, he has Illinois wages (box 16) and Local wages (box 18). Even though the numbers in boxes 16 and 18 are the same, does "enter the amount of wages not shown as Illinois wages" apply only to box 16 and not box 18?

If he uses TurboTax, he will be filing Federal and Illinois tax returns. Since there is no Michigan state tax withheld, he was told that he only needs to file an IL tax return. Will TurboTax properly handle his situation and take care of the credit for Detroit tax, or does he have to file the IL state tax in paper form?

[AmyC · Accepted solution]

Efiling the IL is recommended. Since you were an IL resident while subject to the city tax, it is allowed. You need to enter zero for the wages since there is not a difference, mark the box for city taxes and enter the amount paid to the city as tax paid to Michigan. This will carry to the IL CR and the city will show. It will show in Step 2 for Sch CR in the worksheet and will show on line 51 as a credit.

[frankzha]

Dear Amy,

I appreciate your response and explanation in such detail. Your help is very valuable and greatly appreciated.

Best regards,

[frankzha]

@AmyC 

Hi Amy,

May I ask one more question? As I mentioned earlier, since my relative is an Illinois resident and Illinois has a reciprocal agreement with Michigan, he doesn't need to file a Michigan state tax return. Instead, he only needs to file an Illinois state tax return. However, even as a non-resident of Detroit, he still needs to file a Detroit city tax return.

If my relative uses TurboTax online to file federal and Illinois state tax returns, will TurboTax also enable him to e-file the Detroit city tax return? Or does e-filing the Detroit city tax return have to go along with the Michigan state tax return? If so, I assume he has to file a paper return for Detroit City tax.

Thanks again!

[AmyC]

Detroit makes it tough to file taxes! You can do a MI return online with the Detroit city part filled out. Then you have options:

• print and mail the Detroit return
• efile the Detroit under the MI program

If you want to let the  program do the paperwork and then mail it in, see Detroit File and Pay which states:

File and pay a paper return

1. Complete the applicable forms to be submitted by mail. For your convenience, fillable forms are available on the Forms and Instructions page.
2. Submit your return by mail.

Any return reflecting a refund, credit, or no amount due should be mailed to:

Michigan Department of Treasury

Lansing, MI  48956

[frankzha]

Amy, Thanks again!