Question

2 part year state returns

Forum|Forum|1 year ago
March 10, 2025
1 reply
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Hello,

Need to understand how to enter, and in which order, Part year state returns for Indiana and Michigan (reciprocal states for tax purposes). I lived 6 months in Indiana and earned income from my employer there. Moved into Michigan half way thru the year and continued employment with the Indiana company, remotely. I am now a Michigan resident and will continue to derive 100% of my income from the Indiana company. I paid Indiana state income tax the whole year of 2024 and have since changed my withholding to Michigan. Please tell me if it is correct to file Part Year Resident returns for both states?

K

KeshaH

Yes, you will need to file part-year resident returns for both states.

You'll file the Indiana return and only report the income that you earned while a resident of Indiana. Since Michigan and Indiana have tax reciprocity, you do not owe tax to Indiana for the time that you lived in Michigan - even though you worked in Indiana.

You'll also file the Michigan return and only report the income that you earned while a resident of Michigan. This income is only subject to tax in Michigan, so you won't qualify for a credit for taxes paid to another state. You should be refunded by Indiana for the tax you paid in Indiana on the income you earned while a Michigan resident.

Since the returns are not dependent on each other, you can file them in any order. I recommend requesting that your employer stop withholding state tax for Indiana. If they'll withhold for Michigan, that would be best. If not, you should make estimated payments to Michigan to avoid a balance due at tax time.