[talligator2001]

Hi,
I have posted this question once before, I did not get any response. I am posting it again.
I am currently on H1B1 visa. I got my visa on Oct 1 2004. I got married in Feb 05. My wife joined me here on h4 visa. She got admission at Michigan State univ and got her F1 visa in Aug. So now she stays in Michigan, I stay in Indiana.
Since I pass substantial presence test, I can file 1040, so we are filing federal taxes at married filing jointly. I filled the forms etc for Federal tax. But my problem is state tax. How to work that out.
Indiana says, if you are filing Federal taxes as Married Filing Jointly, then state taxes have to be filed as married filing jointly.
Now what do I do about Michigan taxes. They also require to file state tax as married filing jointly. However they have a Reciprocal State Rule as follows:

"
Reciprocal States
Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin have reciprocal agreements with Michigan. Michigan residents pay only Michigan income tax
on their salaries and wages earned in any of these states. A Michigan resident can file a withholding form with an employer in a reciprocal state to claim exemption from that state’s income tax withholding. The out-of-state income might make Michigan income tax estimate payments necessary. Residents of reciprocal states working in Michigan do not have to pay
Michigan tax on salaries or wages earned in Michigan but do have to pay Michigan tax on business income earned from business activity in Michigan. A resident of a reciprocal state who claims a refund of Michigan withholding tax must file a Michigan Nonresident and Part-Year Resident Schedule (Schedule NR).
"

So according to this she should not pay any taxes in Michigan. So which forms should I file with Michigan or should I not even any forms with them. Help me out

Thanks
Talligator2001

[AtlantaTaxExpert]

Talligator2001:

BottomLine: Your wife should pay MI state taxes on income earned in Michigan and you should pay IN state taxes on income earned in Indiana.

If both states insist you must file jointly, then do so. Just subtract the money earned in the other state when calculate the taxes. Attach the other state's tax return to show them you arepaying taxes to the other state.

[talligator2001]

Dear Atlanta Tax Expert,
Thanks for the answer. Does this mean that on the State tax return form where they ask to enter your Federally adjusted gross income do I put just my income for State of Indiana, and my wife's income for State of Michigan ?

Thanks
talligator2001

[AtlantaTaxExpert]

Yes, that is how I would prepare your returns if you were paying me to do so.