self employed contractor resident of Michigan working from home for Illinois business

[ANDYM3]

I am a self employed contractor that lives in Michigan.  I work from home writing articles for an Illinois publisher.  I was sent a 1099NEC for payments made to me.  Do I have to pay taxes on the income to Illinois and Michigan?  I'm not sure, but I've read that reciprocity agreements don't apply to self employed individuals. If that's the case, can I receive a credit for taxes paid to Illinois on my Michigan tax return?  Second question.  Do I have to pay estimated taxes to both Illinois and Michigan for my Illinois income?

[TomD8 · Accepted solution]

If you never physically work within Illinois, then your income as a non-resident is not taxable by Illinois.

You are correct that reciprocity applies only to W2 income, but reciprocity comes into play only when a taxpayer lives in one of the reciprocal states and actually (physically) works in the other.

As long as your work is performed 100% in Michigan, it is taxable only by Michigan.

[TeresaM · Accepted solution]

TomD8 is quite right. If the work was performed physically in Michigan, then it is taxable in Michigan and not in Illinois. 

Please check My Info in the Federal return and be sure the box is not checked for Made money in another state  (unless you have another situation with income sourced outside of Michigan)

 

[ANDYM3]

thanks for replying to my question!  I just want to be sure that your answer applies to a self employed contractor (got a 1099NEC) who lives in Michigan, never physically worked in Illinois but was paid by a publisher located in Illinois.  All work was done at home in Michigan. So he does not have to file an Illinois tax return.  Correct?  Thanks so much for your help.

[TomD8]

Correct - assuming that the taxpayer has no other income that would be considered Illinois-sourced.  One example of that would be rental income from property located in Illinois.

[ANDYM3]

I did what you and the other person that replied said.  I answered the question on the federal form that there was no income from outside of Michigan.  So now nothing has changed on the returns and it's still apportioning.  The total income entered was 9150 and the Michigan portion was 3750 and the Illinois portion was 5400. The Michigan Form H is the apportionment form that TurboTax made me fill out. Nothing changed on the Michigan return or the Illinois return.  TurboTax still had me fill out the Illinois tax return. If I don' t have to file the Illinois tax return, what do I do now in TurboTax to get rid of the Illinois return?  And how do I zero out the Michigan Form H form.

[TomD8]

How do I delete my state return in TurboTax Online? (intuit.com)