If I live in Michigan but work in Indiana and I am getting a refund from Indiana state then why would I owe money to Michigan state?

[re2boys · Accepted solution]

Because IN and MI have a reciprocal agreement not to tax the wages of the opposite state.

IN taxes should not be withheld from your wages, you need to talk to your employer.  You should get a refund of all withholdings from your wages by IN.

All your income is taxable to MI.  Since you didn't have MI withholding (or estimated payments)  you likely will owe a lot.

See http://www.michigan.gov/treasury/0,1607,7-121-44402_44415_44416-7350--,00.html for more details.