I live in Illinois and work in Michigan. Do I have to pay Michigan taxes

[ChelsiE2 · Accepted solution]

No.  Michigan has a reciprocal agreement with Illinois.  This means that if you are a resident of Illinois but work in Michigan, then you will not be subject to taxation by the State of Michigan.  

You will however need to pay Illinois State Taxes on the amounts you earn working in Michigan.

[grumpydfm]

I did Michicgan first and got a small refund.  Than I did Illinois and have to pay a large amount.  What happen to the agreement?

[DianeW777]

It's important to do the nonresident return first, then do the resident return. Michigan (MI) does have a reciprocal agreement with Illinois (IL).  

If necessary you can enter zero for the wages in your nonresident state, then be sure to leave the state withholdings in place.  This would be the W-2 entry in your federal portion of the return. The key is to for your tax returns to be accurately prepared.

Walk through the nonresident state and then the resident state for the accurate results.  You should get a full refund of any tax withheld from wages.  Keep in mind that reciprocity applies only to wages that are earned in a reciprocal state.  It does not apply to other types of income if the source of the income is in the nonresident state. Watch for any questions regarding reciprocal agreements.

Reciprocity:

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.

• States with reciprocal agreements