1) Why wasn't this caught by Illinois in 2017 & 2018, did something change in 2019 in Illinois or the software? Do you think they still may come back for 2017 & 2018?

NOTHING CHANGED. THEY HAVE BEEN RECIPROCAL STATES FOREVER.

2) Why if I prepared the Michigan return first, Illinois second and selected Michigan as the state in the tax software why was the credit allowed? 

THERE ARE NO CREDITS INVOLVED WHATSOEVER. DOESN'T MATTER THE ORDER YOU PREPARE THEM IN...SAME RESULT. THERE ARE NO CREDITS AT ALL IN THIS SCENARIO.

HERE'S HOW TO MAKE IT WORK:

1. FIRST ENTER THE WAGES ON THE W-2 WKSHT AND INDICATE "MI" AS THE STATE SOURCE.

2. BE SURE (ON THE INFO WKSHT AT THE BOTTOM) YOU MARK "NONRESIDENT" AND THEN ENTER 'MI". I'M SURE YOU'VE ALREADY DONE THIS. BUT WHAT YOU ARE VERY LIKELY DOING WRONG (COMMON ERROR) IS YOU NEED TO THEN...

3. GO INTO THE "QUICKZOOM TO NONRESIDENT STATE ALLOCATION WORKSHEET" AND ENTER ZERO AS THE WAGES IN THE MICHIGAN COLUMN. THE PROGRAM WILL AUTOMATICALLY ENTER THE MI WAGES IN THE MI COLUMN, BUT YOU NEED TO ZERO IT OUT. VOILA! PROBLEM SOLVED.

YOU'LL GET THE FULL MICHIGAN TAX REFUND AND OWE A BOATLOAD TO ILLINOIS BECAUSE YOUR CLIENT HAS NOT BEEN MAKING IL EST TAX PAYMENTS. HAVE THEM START MAKING IL EST TAX PMNTS FOR 2021.

Is this a software glitch or do I need to enter this differently somehow to make it work?

NOPE - NO SOFTWARE GLITCH AT ALL.

On line 50 I x'd the box that says Michigan yet it did not say we couldn't take the tax credit from Michigan and allowed the withholdings from Michigan to remain as a credit.

YOU GOT IT - YOU GET ABSLUTELY NO CREDIT WHATSOEVER BECUASE THEY ARE RECIPROCAL STATES. 

Stay safe, warm and eat well. Oh, and brush your teeth too. 🙂