Hi there,

My employer is MI based and I work as contractor in IT industry.
So basically, my employer sends me to different states depending on the project.
I didn't have a problem until now, because most of the time I was working in MI.
But during 2008, I was in MI till June. In July, I had to move to IL because the client is in IL.
So, I was shuttling between MI and IL most of the time. I signed a lease in IL from the month of December '08.
But, my car registration was close to expiring in Aug '08.
So, I had my pay stubs posted to the IL address in July '08 (the current address, then it was just my friends place)
And registered my car in IL. Also, since I was driving to work in IL during weekdays, I got my drivers license also changed to IL one.

On my W2, my employer deducted only MI tax for the whole year of 2008.

So, my question is... is it OK if I pay only MI taxes for the whole year of 2008 ? Will IL state be after me asking to pay the IL state basing on my car registration ?

Or should I just pay for MI until June and IL from July? In that case, since my employer did not deduct IL state tax on W2 will that be an issue?

Thank you,
KK.

KK:

You need to file and PAY Illinois state income tax, because that is where you earned the money.

You can apply for a credit for the Illinois taxes paid on your Michigan state tax return, so you should be able to avoid double taxation. You MAY want to get professional tax help because of this tax issue.

If you continue to work in Illinois, have your employer STOP withholding Michigan taxes (and refund the Michigan taxes already withheld in Jan 09) and START withholding Illinois, because it looks like, for 2009, you will be an ILLINOIS RESIDENT.