I live in Michigan, but work in Inidiana. Why are they taking local taxes out of my check for Indiana and then not refunding any of that?

[Hal_Al]

MI has a reciprocal agreement, on wages, with IN. No IN state taxes are withheld or due and you do not need to file an IN return. But your home state will tax you on your IN income.

If IN state taxes are mistakenly withheld, you have to file an IN return to get a refund. You should ask your employer to stop withholding so you don't have to file an IN return every year.

However the reciprocity agreement does not apply to local county taxes. You are not required to file a local city/county 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. 

For how to go about claiming a credit on your MI return, see https://ttlc.intuit.com/questions/3418266-i-live-in-michigan-and-work-in-indiana-i-m-being-charged-e...