Here's my situation, left a job in MI in Oct 05 and moved out of state. I had a small loan out of my 401K from my previous job that defaulted in Jan 06. I know I need to pay the taxes and penalties on it but my question is which state do I need to pay the taxes to? I lived in NC for all of 2006, but the 1099-R I received has a taxpayer ID that starts with MI-, so do I need to file MI taxes and claim the loan as my only income for 2006 in MI? Any help you can provide me with is greatly appreciated as the MI treasury has not been able to provide me with an answer. Thanks

Since the default happen effective in Jan 06, you are liable to pay taxes to NC only.

If no money was withheld and sent to Michigan, then you have no need to file a Michigan tax return.