The City of Detroit taxes resident and nonresident wages at different tax rates. Thus, when completing a tax return that includes Form 5120, City of Detroit Part-Year Resident Income Tax Return, the local Detroit wages on Form W-2 should reflect only the wages earned while the taxpayer was a resident of the city.
So, for example, if the Michigan wages on the W-2 are $50,000, Detroit is the locality, and the taxpayer resided in Detroit for half the year, then you should enter $25,000 in W-2 Box 18 "Local wages, tips, etc.". In the City of Detroit return, you'll indicate the remaining $25,000 of wages as having been earned during the nonresident period.
Steps
First, ensure Detroit wages you enter in W-2 Box 18 are the wages the taxpayer earned during the time period they resided in the city. (In other words, ignore the Box 18 wages showing on the actual W-2.)
Next, begin the City of Detroit tax return if you haven't already done so. Assuming you've already started the Michigan tax return, from the Michigan Return menu select:
- City of Detroit Return
- City of Detroit Part-Year Resident Return - Click the Yes button to confirm you'd like to complete the part-year return.
- Income - Under this menu you'll work in both the resident income and nonresident income menus.
- Resident Income
- Would you like to use the local wages from the W-2 for the city of Detroit to calculate the city income? - Click Yes. This will pull in the Detroit wage amount you entered on the W-2. Complete any other fields that need entry on this page, then click CONTINUE to return to the previous menu.
- Nonresident Income
- Nonresident amount of Wages, salaries, tips, etc. - Enter the nonresident wages. This amount should be equal to the Detroit wages showing in Box 18 of the actual W-2 minus the amount of resident wages. Complete any other fields that need entry on this page, then click CONTINUE to return to the previous menu.
- Click BACK to return to the City of Detroit Part-Year Resident Return menu where you can complete the remainder of the form as needed.
Additional Information: