I prepared my Illinois and Michigan state returns on TurboTax but it is not recognizing the reciprocity between the states. How do I correct this in TurboTax

[MaryK4]

Can you clarify?  If you have reciprocity, you do not file tax returns in both states, only your resident state.

[edmadden23]

I live in IL and worked in MI.  MI inadvertently held state and local taxes.  I expected when I entered into TurboTax, it would recognize the reciprocity between the states and refund the MI withholdings.

[KrisD15]

TurboTax knows this also, however there is SOME income that does not abide by the "reciprocal" agreement, such as capital gain. 

In TurboTax, compute the Non-Resident Michigan return first, and allocate 0 (zero) income to that state if all your Michigan income was wages. 

Next, do your Resident Illinois return and allocate all your income to Illinois. 

The result should be refunded Michigan tax and Illinois tax due. 

Local governments do not abide by state agreements, so you will still owe the local tax. 

File Form MI-W4 with your employer.

Reciprocal States 

[edmadden23]

So go into the W2 for Illinois and add MI wages to box 1 and then go into the W2 for MI and enter zero for box 1?

[edmadden23]

Sorry, it would be box 16 on the W2 entry, correct?  And I would have to go back to the Fed return to enter that, correct?

[KrisD15]

No. Enter the W-2 on your FEDERAL section of TurboTax (only) as it was reported to you.  Don't CHANGE anything on your W-2.

AFTER you complete the FEDERAL return, start the Michigan non-resident return.

TurboTax ASKS you what you EARNED in Michigan, answer 0.

See screen-shot

TurboTax will see the Michigan tax that was withheld and reported on your W-2. 

TurboTax should then REFUND that amount back to you. The local tax might be adjusted, but it won't be completely refunded.

Finally do the Illinois return. 

Allocate all your income on the Illinois return.

[edmadden23]

You have been fantastic!  Thank you.

Can I ask you one other unrelated question?  I am filing a return for my 91 year old father.  He has a monthly pension but TurboTax keeps asking if and how much of the money is a Required Minimum Distribution.  I would think that would not apply since he just receives a set monthly pension payout.  How do I answer TurboTax's questions around RMD?

[MaryK4]

The Required Minimum Distribution for a pension is automatic- you can indicate Yes he received the RMD unless (!) for some reason he just told the plan administrator "I do not want the distributions."  @edmadden23 

[edmadden23]

Thank you so much for your help.  I really appreciate you taking the time to reply.