Hi-

I am a resident of MN for the whole of year 2012. But my employer is in MI and he has been withholding MI state taxes but not for MN. Since MI and MN are reciprocal states I am claiming a refund of all taxes withheld in MI. Now my tax liability in MN is only slightly higher than what I paid to MI.

1) Now if I get a refund from MI and pay MN, will I be considered late by MN for whole of the tax liability or just the difference between MI and MN taxes?

2) Since there was no MN taxes withheld during the year will I be assessed a penalty for underpaying estimated tax in MN? Or is that waived for me as MN and MI are reciprocal states and I have been paying MI taxes?

Thanks!

You need to file a Michigan tax return and get a complete refund, THEN you need to file a Minnesota tax return and pay what is owed.

It is likely Minnesota WILL assess penalties and interest for under-withholding and filing and paying late.

If your employer refuses to withhold for Minnesota, you need to pay quaterly estimated taxes to Minnesota for 2013.

Now, if you WORK in Michigan but LIVE in Minnesota, you DO owe Michigan taxes, but you can claim a tax credit on your Minnesota return for taxes paid to Michigan.

Also, do NOT forget to file a claim for the rent paid in Minnesota. That is filed SEPARATE from the Minnesota tax return.

Thanks AtlantaTaxExpert,

Can you please clarify "MN will likely asess penalties"? Can I just pay the taxes alone and see if I am asked for the penalites and interest?

Also, I do not work in MI. I live and work in (contracting) MN, but my employer is in MI and so he wihtholds MI taxes. So I am a non-residnt for MI and resident for MN, right?

Thanks again for the tips on the rent paid.

trvtrekker

If you worked and lived in Minnesota, then Michigan has NO LEGAL STANDING to tax your income because you are a NON-resident.

You CAN just pay the taxes and hope Minnesota will not assess penalties, but that is practically automatic these days, as it is calculated and generated by computer.