Determination engine

Which state do you actually withhold in?

Reciprocity, convenience-of-the-employer, nonresident thresholds and unemployment localization, applied together to one employee's facts. Every answer cites the state source it came from.

Withhold Indiana income tax.

Michigan and Indiana have a reciprocal agreement, so the work state stands down once the exemption certificate is on file.

Income tax withheld to

Indiana

Flat 2.95%

Employee certificate

MI-W4

Employee's Michigan Withholding Exemption Certificate (reciprocal-state exemption line)

Unemployment insurance

Michigan

Localized under factor 1: Localization.

Reciprocal agreement

Yes

Michigan exempts Indiana residents.

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File MI-W4 with the employer

Reciprocity is not automatic. Until the employee files MI-W4 (Employee's Michigan Withholding Exemption Certificate (reciprocal-state exemption line)) you are legally required to withhold Michigan tax. Keep the signed form on file; it is not sent to the state.

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Withhold Indiana income tax instead

Under the agreement the employee is taxed only by their state of residence. You will need a Indiana withholding account.

Reciprocity does not cover Michigan local taxes

24 Michigan cities levy a municipal income tax (Detroit at 2.4% resident / 1.2% nonresident; most others 1% resident / 0.5% nonresident). Employers in those cities must withhold city tax separately. Michigan's state reciprocity agreements do NOT exempt an employee from Michigan CITY income tax on work physically performed in the city -- Detroit in particular taxes nonresidents on Detroit workdays.

Indiana has local income taxes at the residence

EVERY Indiana county imposes a Local Income Tax (LIT), withheld by the employer. CRITICAL: Indiana's reciprocity agreements do NOT cover county LIT -- employers must still withhold county tax from residents of reciprocal states who have a principal place of employment in an Indiana county as of January 1. Employees expecting 30 or fewer Indiana workdays may file Form WH-4AFF to claim a county tax exemption.

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Employer registrations you will need

Indiana — Income tax withholding: Indiana Department of Revenue
Michigan — Unemployment insurance: Michigan Unemployment Insurance Agency (UIA)

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Get the form

MI-W4 — Michigan (official state source)

Michigan profile Indiana profile Full write-up for this pair

Change the inputs

Withholding determination

Answer six questions. The result is a shareable link, so you can paste it into a ticket or an email.

Employee lives inState of residence

Work is performed inWhere the employee physically sits

Employer is based inWhere the work is directed from

Days in the work stateThis calendar year, leave blank if unknown

Wages from work-state daysUS dollars, leave blank if unknown

Arrangement Works remotely rather than at an employer location Remote work is an employer necessity, not employee preference

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This is a determination aid, not advice. StateSide encodes published state rules and applies them mechanically to the facts you enter. It does not know your entity structure, your nexus history, your equity compensation, or the dozens of exceptions that turn a clean rule into a judgement call. Every determination cites the state source it came from — verify against that source, and take anything consequential to a payroll tax professional before you act on it.