Part time resident Ohio and Michigan

[BGSU94]

Helping my daughter with her taxes.  She lived in Ohio until June 24 2020 then moved back home with us for rest of the year in Michigan.  She works for a company in Ohio and only ever took out Ohio taxes.  I'm guessing I need to file in both states but how would I divide up her income?

[TomD8]

Was your daughter's main, primary home in Ohio prior to her return to Michigan, or was she living in Ohio temporarily - for example, to attend school - while her primary home always remained in Michigan?  

[JotikaT2]

It depends.

In addition to TomD8's question above, you should be aware that Michigan and Ohio have a state reciprocal agreement.  She would typically only need to file a tax return and have income taxes withheld in her resident state.

Please see the attached link for more information on state reciprocal agreements and what it means.

State reciprocal agreements

[BGSU94]

She lived in an apartment starting in Sept 2019 - Jun 24 2020.  Would have been her main residence while in Ohio.  She was going to school in 2019 but did not return to start a new semester in 2020.  Her situation ended up not working out were she was staying and why she came back home.    Doesn't really play into it but we only live 3-4 miles from the Ohio border and she was only 15 minutes from us..

[BGSU94]

I am aware of the reciprocity.  However when she moved back home to Michigan she apparently never told her employer and the Ohio withholding continued as shown on her W-2.  That it where my confusion is on how to handle the residency and the correct way to file her state returns.

[TomD8]

His situation is a bit ambiguous, but it sounds like she initially went to Ohio on a temporary basis in order to attend school, even though it didn't work out.  And her OH stay did in fact turn out to be temporary.  So I think the correct interpretation is that she never established Ohio residency, and that her State of Residence for tax purposes is MI.

This means that all her 2020 income is taxable by her home state of Michigan, and not by Ohio.  MI-OH reciprocity means that if you work in one of the two states and reside in the other, your W2 income is taxable only by your state of residence.

However, since her employer withheld OH taxes, she will have to file a non-resident OH return, allocating zero income to OH, in order to get those taxes refunded.

If she ever works in OH while still living in MI, she should file OH Form IT-4NR with her Ohio employer.  This will exempt her from Ohio withholding.  Here's a link to that form: 

https://tax.ohio.gov/static/forms/employer_withholding/generic/wth_it4nr.pdf 

[MaryK4]

Her situation is unique because she did quit school at the end of 2019 but continued to live in Ohio, (at that time her intention may not have been firm)  See the IT NRS-Ohio Nonresident Statement - if she can complete it, then she should file as an Ohio nonresident and a Michigan resident.  

If she cannot complete the form, she will want to file as a Part-Year resident of Ohio and Michigan.

@BGSU94

[TomD8]

@MaryK4 

Thanks, Mary.  I was not aware of that form.

[BGSU94]

So being able to complete the IT-NRS she files as a Michigan resident and allocates all her income to Michigan and as a result will have to pay MI state tax.  While at the same time allocating zero income for Ohio and getting refunded all Ohio tax?  As TomD8 stated as well.

@MaryK4 

[TomD8]

That is correct.

[Hal_Al]

Be advised that if she had any Ohio City income tax withheld (box 19 of the W-2) she cannot get that refunded.  But, as a non resident (of the city) she is not required to file a city income tax return  (subject to interpretation. as others have said, unique circumstances).