My mom lives in Michigan, she moved from Illinois to Michigan and got a job in Indiana does she file all 3 states? How do you split the income?

[cbusa]

My mom worked in Illinois and got an Illinois w-2, during the year she moved to Michigan and became a Michigan resident and got a new job; however the new job is in Indiana. The Indiana company sent her a w2 the w2 shows her Michigan home address, but the company's address is in Indiana. The company is located in Indiana. Does she file state returns in all 3 states or just 2? How does she split the income/deductions/etc?

[DoninGA]

She would file a part year resident tax return for Michigan and Illinois.  If she never worked or lived in Indiana she does not file an Indiana state income tax return if the W-2 from the Indiana company did not withhold Indiana state income taxes on her W-2.

She reports all income that she received while a Michigan resident and all the income she received while an Illinois resident on each state income tax return.

[Critter-3]

A part year IL and part year MI returns will be filed .   If you live in MI but work in IN the employer should not withhold IN taxes ... see the link below for info on the correct form to fill in for that employer.   If they will withhold MI taxes that would be nice but they are not required to do so. https://ttlc.intuit.com/turbotax-support/en-us/help-article/state-taxes/states-reciprocal-agreements...

[cbusa]

Thanks just to clarify the company is indiana but she works in indiana as well. Lives in Michigan. She doesn’t have any income from jobs in Michigan other than she lives there 

[Hal_Al]

Michigan and Indiana have a reciprocal agreement.  Normally a MI resident would not pay tax to IN. However, the agreement only applies to full year residents.  So, for 2022, she will need to file in all three states. MI will give her a credit for any tax she has to pay to IN.  She must pay tax to her resident state (MI) even though the earned no income there. She pays MI tax only on the income received while a resident, regardless of where earned. 

For future years, she will not need to file IN.  Her employer should not withhold IN state tax.

As for IN county income tax, see https://ttlc.intuit.com/community/state-taxes/discussion/i-live-in-michigan-but-work-in-inidiana-why...

[TomD8]

@Hal_Al wrote:  "However, the agreement only applies to full year residents."

Are you sure?  I can't find anything in the MI-IN reciprocity agreements that excludes part-year residents.

[Hal_Al]

@TomD8 

Yes, pretty much. I know it's true of Ohio's reiprocity agreements.  But, I also verified it at the IN DOR web site: https://www.in.gov/dor/individual-income-taxes/individual-income-tax-overview/

"Full-Year Residents of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin

If you were a full-year resident of Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin, and your only income from Indiana was from wages, salaries, tips or commissions then you need to file Form IT-40RNR, Indiana Reciprocal Nonresident Individual Income Tax Return."

I interpret that to mean that she has to file an IN non resident return and claim a credit on her part year resident MI return, for 2022 only. 

[Critter-3]

Correct. 

[TomD8]

@Hal_Al & @Critter-3 --

From page 13 of the 2021 Instruction Booklet for Indiana Form IT-40PNR, the part-year resident return, Lines 1 and 2 instructions:

"Note for part-year or full-year nonresidents. Do not enter that portion of your Indiana source wage, salary, tip or commission income in Column B earned while you were a resident of a reciprocal agreement state (see Reciprocal States: Special Filing and Income Reporting Instructions on page 8)."

Apparently the MI-IN reciprocity agreement does indeed apply to part-year residents.

[Hal_Al]

@TomD8 @cbusa  That's more specific than the other language.  I'd go by that language in the form instructions.

It could be argued that the other language applies only to withholding (the more commom situation would be the taxpayer was a part year resident of IN and MI, but worked all year in IN and withholding for part of the year would be appropriate). 

[TomD8]

If you think about it, it wouldn’t make much sense for reciprocity to apply to someone who lives in a state for 12 months, but not to someone who (for example) lives there for 11 months.  Not that tax laws always make sense.