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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
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Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Resident of Illinoins but worked and payroll run in Michigan. Hello, I

Resolved Question:

Resident of Illinoins but worked and payroll run in Michigan.

Hello,

I lived in Illinois for all of 2010, but worked for a Michigan firm that paid the taxes in Michigan. I filed state tax returns in both IL and MI (as a Non-resident) using TaxAct software. On line 17 of the IL tax return (Income tax paid to another state while an Illinois resident) I entered a certain amount (e.g. $1234.56).

Now, I received a letter from Illinois Dept of Revenue that they changed "credit for tax paid to other states on Line 17. Illinois residents may not claim a credit for tax paid on wages or other employee compensation received from employers in Iowa, Kentucky, Michigan and Wisconsin, because IL residents are covered by a reciprocal agreement and are not taxed on this income by these states. If you disagree with our changes, you must send us copies of your out-of-state returns." They are asking that I pay this $1234.56 to Illinois.

On my Michigan tax returns, I paid e.g. $2345.67 and got a small refund e.g. $456.78 refund. Is there someplace on my Michigan return that says I was indeed taxed on this income in Michigan also? and that I do not have to pay this amount ($1234.56) being asked by Illinois?

Pl. advise. Also, let me know if I need to know or look out for something else.

Thanks,
SKT
Submitted: 2 years ago.
Category: Tax
Expert:  MequonCPA replied 2 years ago.
Hi and welcome to JustAnswer:

You do owe the tax to Illinois.

You need to file an amended Michigan Non-resident return an request a refund of the remainer of the Michigan tax withheld. Your wages are not taxable in Michigan, only Illinois.

Going forward you should have your employer withhold Illinois tax. If that is not an option, you may need to make quarterly estimated tax payments to Illinois.
Customer: replied 2 years ago.

Thanks for the answer. Considering the sentence: "If you disagree with our changes, you must send us copies of your out-of-state returns."

 

If I send them the Michigan tax returns, wouldn't they understand and accept that Michigan has already taken my taxes and collect the same from Michigan directly?

 

Pl. advise.

Expert:  MequonCPA replied 2 years ago.
Sorry, it doesn't work that way. Illinois is entitled to the amounts requested. It is your responsibility to resolve your situation in Michigan.

To make yourself whole you will need to pay the Illinois amount and file an amended Michigan return to obtain a refund. It appears you may end up ahead. $1,900 refund from Michigan and a payment of $1,200 to Illinois.

If you send the returns, their response will be that the income is not taxable in Michigan and thus you are not allowed a credit.
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2322
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Hello again,

I'm preparing the amended tax return for Michigan and realized that the refund is no a new number. I already got a refund of some amount e.g. $456.78 earlier this year from Michigan. Now, the amended return shows that I should get a higher number e.g. $2345.67.

Should I leave it to the Michigan Dept. of Treasury to figure out that they already paid me some of this money earlier in the year? Or is there any place for me to actually do the math for them. Also, would I have to file any other credit form besides 1040X ? Pl. advise.

I would be happy to post this as a new question if that helps... but was afraid of losing this entire question as a reference if I did that.

Thanks, XXXXX XXXXX

SKT
Expert:  MequonCPA replied 2 years ago.
Hi -

On the Michigan Form 1040X, the overpayment from the original return is reported on Line 41.
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2322
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Hello MequonCPA,

I'm filling out the MI-1040X now and need some help - particularly line 14. Should I put in 0 (Zero) here - in column C? so that I get the additional refund?

On line 41, I put in the refund of $456.78 that I got last year.

Finally, I believe the explanations would go in 49. Just wanted to confirm that I am doing this right. Many thanks, XXXXX XXXXX for your time and clarification.

Best,
SKT
Expert:  MequonCPA replied 2 years ago.
Column A should be the amounts from the original return. Column B should be the changes. There should be a relatively large number on Line 10 column B. Line 13 column C is probably $-0- as is Line 14, Column C.

Line 37 should show the amounts withheld (same in A & C). You would report the refund you already received on Line 41.

You will also need to complete a Schedule NR. Line 5 wages should be the actual amount column A, $-0- in column B and the actual amount in column C.

Your explanation will go on Line 49.

You may also want to enclose a copy the your Illinois return and the notice.
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2322
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and other Tax Specialists are ready to help you

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