5 Michigan Tax Tips for Michigan Homebuyers

On May 3, 2022   /   Michigan Taxes  
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5 Michigan Tax Tips for Michigan Homebuyers: Home buyers and home sellers may not want to think about real estate transaction taxes, but they are inevitable. You may be liable for any number of federal, state or local taxes upon a sale’s completion. Here’s what you need to know about Michigan real estate taxes.

They are the last thing any home seller or buyer wants to think about in a real estate transaction. What are its tax implications, how much are they, and who pays?

How much you have to pay and if you have to a particular real estate tax at all depends on a number of factors. When it comes to one particular tax, the buyer and seller can even negotiate who pays it.

Having the right guidance to get you through the tax maze can save your tens-of-thousands of dollars. Whether you’re buying or selling, you will want to work with a professional realtor who knows the ins and outs of real estate taxes.

Here’s 5 Michigan Tax Tips for Michigan Homebuyers to get you started and if you have any other questions CONTACT ATS ADVISORS today!

1. Will You Have to Pay Taxes When You Sell Your Home in Michigan?

If you’re a typical home seller in Michigan, you do not need to report your capital gain to the IRS after the sale. However, this does not apply to everyone. If you file as a single person and you sell your home for a capital gain of more than $250,000 (more than $500,000 if you file a joint return), you may have to pay a capital gain on money you earn in excess of the $250,000 limit.

Anyone who has lived in a home as their primary residence for at least two years (of the previous five) before the sale does not have to pay a capital gain below $250,000.

Here’s how to calculate your capital gain. Take the price that you paid for the purchase price and subtract it from the final sale. So, if you bought a home for $300,000 three years ago, lived in it during that time, and then sold it for $600,000, your capital gain would be $50,000.

That’s the money you may owe taxes on. But this amount can be reduced. If you made $60,000 worth of repairs and home improvements to the property, you can deduct this from the capital gain. To do this, just add $60,000 to $300,000 to the amount of the home’s purchase price.

Now, your net gain on the property is just $240,000, which is below the capital gain limit for a single person. The IRS guide on capital gains from home purchases notes that there are sellers who may want to report their capital gain as a taxable gain even though some or all of it is eligible for exclusion.

Sellers who may want to do this include homeowners who plan to sell another home within the next two years (and expect to receive a bigger gain from the sale of that other property). Because tax laws are quite complicated in Michigan, all home sellers should seek professional guidance.

A local real estate agent will be able to help you determine what your tax liabilities may be. They buy and sell homes everyday and they understand local, state, and federal real estate laws. They are highly knowledgeable and will be able to suggest ways that you can reduce your tax burden on the home sale.

2. How Much Are Real Estate Transfer Taxes in Michigan (and Who Pays Them)?

Real estate transfer taxes can be complicated because several jurisdictions may be responsible for them. They can be imposed by states, counties, or municipal authorities. A real estate transfer tax is typically charged on the transfer of legal deeds, titles to a property, or certificates that are transferred when a buyer formally agrees to the purchase.

These are what are known as ad valorem taxes. An ad valorem tax is based on the assessed value of the item being sold, in this case the home. So, the tax is based on the property value and it is usually the responsibility of the seller.

It’s important to note that a home purchase is a negotiation and that there are no firm rules. A home seller and home buyer can negotiate who pays the transfer tax in most states. So, the tax (and many other parts of a home sale) is negotiable, at least when it comes to who pays for it. It is not unusual for a seller and buyer to come to an agreement where they split the cost of the tax.

Unfortunately, Michigan is not one of the five states (Mississippi, New Mexico, Missouri, Wyoming, and North Dakota) without the transfer tax, which can be hefty. The state transfer tax rate is $3.75 for every $500 of value transferred. There is also a county transfer tax rate in Michigan. It’s $0.55 for every $500 of value transferred. (In some counties the tax rate can be up to $0.75/$1000 of value transferred.)

There are transfer tax exemptions, and a professional realtor will be able to help you take full advantage of them. Exemptions apply in some sales to family members and to the financing of some property sales. Your Clever Partner Agent will be able to guide you through any deductibles you may be entitled to or connect you to a professional tax advisor so that you do not pay more than you have to after the sale.

3. How to Calculate Property Taxes in Michigan

Property taxes are another ad valorem tax. In other words, they are assessed on the value of your property. They can vary greatly from state-to-state, city-to-city, and even neighborhood-to-neighborhood.

The reason for major differences on what you pay in property taxes is due to the fact that they pay for services in the community where the property is located. For example, they may be used for community centers, school funding, roads, etc.

The quality of these services is often dependent on the amount of money a particular neighborhood takes in from property taxes. The more the community collects in property tax revenue, the more they can spend on services for those taxpayers.

As noted above, property taxes are calculated based on the value of your property. This can be done through several methods. In what’s termed a “sales comparison,” the assessor will calculate the value of your home based on other similar properties that have recently sold in the neighborhood. The criteria they use can include the state of the property, the overall market conditions in the area, and the costs of any improvements that are made on the property and any structures on it.

An assessor may also use the “cost method.” In this method, the assessor determines how much it would cost to rebuild your home from scratch. If this method is used, the cost of depreciation is factored into the assessment. Lastly, an assessor can also use what’s called the “income method.” This is used primarily in commercial and business property transactions.

Unfortunately for Michigan homeowners, the state has one of the highest property tax rates in the U.S. Its average tax rate is 1.83%. In Saint Clair County, it’s slightly less at 1.6%. At that rate, a homeowner with a property worth $250,000 would pay $4,080 in taxes a year.

That’s more than $1,000 more than the national average. Across the state, Michigan homeowners with properties worth $250,000 pay almost $1,600 more each year than the national average.

It’s something that home buyers need to factor into their budgets. Various municipalities in Michigan set their own dates for when they are due. So, it’s important that you save an appropriate amount each month, although you may only have to pay them quarterly or less infrequently.

4. Tax Breaks for Michigan Home Buyers & Sellers

Michigan home buyers and sellers have a variety of federal and state tax deductions available to them. A Clever Partner Agent can answer any questions that you may have or guide you to a tax professional, potentially saving you thousands of dollars a year. Here are some key deductions that are available.

The Mortgage Interest Deduction

This allows home buyers to deduct the interest from mortgages up to $750,000. These tax credits also allow the lender the option to include the estimated tax credit when calculating the debt-to-income ratio, so it can help make homeownership easier.

Property Taxes

Property taxes are deductible on your 1040 Form (up to $10,000). But be careful to read the fine print (or ask a tax professional) when it comes to the requirements.

Tax breaks for home sellers include:

Costs of Home Improvement Repairs and Improvements

Any home improvements or repairs to a property can be tax deductible. So, it’s important to keep all of your receipts. And remember, there are time limits. The repairs and improvements typically have to made within 90 days of the closing date.

Selling Costs

Home sellers can also reduce their income tax by the amount of their selling costs. These may be costs associated with title insurance, broker’s commissions, inspection fees, and any repairs made to the property.

5. The Next Step

Whether you’re buying a home or selling one, there are tax implications to the sale of property. You need to be fully aware of your responsibilities and tax liabilities. That’s why it’s essential that you speak to a Clever Partner Agent.

They can help you determine what all of the costs of selling a home will entail. If you’re a home buyer, they’ll help you work through a complete budget that can get you into your own home, sometimes even for the same amount you may be paying for rent.

They can also point you to professional tax advisors who can let you know about the variety of tax programs, credits, and other benefits you may be entitled to. These can save buyers and sellers thousands of dollars.

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May 16 filing deadline for many tax-exempt organizations

On April 26, 2022   /   IRS  
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WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations that many have a filing deadline of May 16, 2022. Those that operate on a calendar-year (CY) basis have certain annual information and tax returns they file with the IRS. These returns are:

  • Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF)
  • Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
  • Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts)
  • Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

Mandatory electronic filing

Electronic filing provides fast acknowledgement that the IRS has received the return and reduces processing time, making compliance with reporting requirements easier.

Organizations filing a Form 990, 990-EZ, 990-PF or 990-T for CY2021 must file their returns electronically. Private foundations filing a Form 4720 for CY 2021 must file the form electronically. Charities and other tax-exempt organizations can file these forms electronically through an IRS Authorized e-File Provider.

Organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on IRS.gov.

“To help exempt organizations comply with their filing requirements, the IRS provides a series of pre-recorded online workshops,” said Robert Malone, Exempt Organizations and Government Entities Director. “These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax-exempt status, including filing annual information returns.”

Common errors

The IRS also reminds organizations to submit complete and accurate returns. If an organization’s return is incomplete or the wrong return for the organization, the return will be rejected. Common errors include missing or incomplete schedules.

Extension of time to file

Tax-exempt organizations that need additional time to file beyond the May 16 deadline can request a 6-month automatic extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return PDF. In situations where tax is due, extending the time for filing a return does not extend the time for paying tax. The IRS encourages organizations requesting an extension to electronically file Form 8868.

 

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Missed Tax Deadline? File Now To Limit Penalties

On April 20, 2022   /   IRS  
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Taxpayers who owe and missed tax deadline should file now to limit penalties and interest; not too late to claim the Child Tax Credit for 2021.

The Internal Revenue Service encourages taxpayers who missed Monday’s April 18 tax-filing deadline to file as soon as possible. While taxpayers due a refund receive no penalty for filing late, those who owe and missed tax deadline without requesting an extension should file quickly to limit penalties and interest.

Families who don’t owe taxes to the IRS can still file their 2021 tax return and claim the Child Tax Credit for the 2021 tax year at any point until April 15, 2025, without any penalty. This year also marks the first time in history that many families with children in Puerto Rico will be eligible to claim the Child Tax Credit, which has been expanded to provide up to $3,600 per child.

Some taxpayers automatically qualify for extra time to file and pay taxes due without penalties and interest, including:

File without penalty to get a tax refund

Some people may choose not to file a tax return because they didn’t earn enough money to be required to file. But they may miss out on receiving a refund. The only way to get a refund is to file a tax return. There’s no penalty for filing after the April 18 deadline if a refund is due. Taxpayers are encouraged to use electronic filing options including IRS Free File which is available on IRS.gov through October 17 to prepare and file 2021 tax returns electronically.

While most tax credits can be used to reduce the tax owed, there are a few credits that allow taxpayers to receive money beyond what they owe. The most common examples of these refundable credits are the Earned Income Tax Credit, Child and Dependent Care Credit and Child Tax Credit. Those who don’t usually file and didn’t qualify for a third-round Economic Impact Payment or got less than the full amount may be eligible to claim the 2021 Recovery Rebate Credit when they file their 2021 tax return. Taxpayers often fail to file a tax return and claim a refund for these credits and others for which they may be eligible.

Generally, the IRS issues nine out of 10 refunds in less than 21 days for taxpayers who e-file and choose direct deposit. However, it’s possible a tax return may require additional review or take longer. The IRS processes paper tax returns in the order they are received.

Taxpayers can track their refund using the Where’s My Refund? tool on IRS.gov, IRS2Go or by calling the automated refund hotline at 800-829-1954. Taxpayers need the primary Social Security number on the tax return, the filing status and the expected refund amount. The refund status information updates once daily, usually overnight, so there’s no need to check more frequently.

File to reduce penalties and interest

Taxpayers should file their tax return and pay any taxes they owe as soon as possible to reduce penalties and interest. An extension to file is not an extension to pay. An extension to file provides an additional six months with a new filing deadline of October 17. Penalties and interest apply to taxes owed after April 18 and interest is charged on tax and penalties until the balance is paid in full.

Filing and paying as much as possible is key because the late-filing penalty and late-payment penalty add up quickly.

Even if a taxpayer can’t afford to immediately pay the full amount of taxes owed, they should still file a tax return to reduce possible delayed filing penalties. The IRS offers a variety of options for taxpayers who owe the IRS but cannot afford to pay.

Usually, the failure to file penalty is 5% of the tax owed for each month or part of a month that a tax return is late, up to five months, reduced by the failure to pay penalty amount for any month where both penalties apply. If a return is filed more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.

The failure to pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month until the tax is fully paid or until 25% is reached. The rate is subject to change. For more information see the Penalties page on IRS.gov.

Taxpayers may qualify for penalty relief if they have filed and paid timely for the past three years and meet other important requirements, including paying or arranging to pay any tax due. For more information, see the first time penalty abatement page on IRS.gov.

Pay taxes due electronically on IRS.gov/payments

Those who owe taxes can pay quickly and securely via their Online Account, IRS Direct Pay, debit or credit card or digital wallet, or they can apply online for a payment plan (including an installment agreement). Taxpayers paying electronically receive immediate confirmation when they submit their payment. With Direct Pay and the Electronic Federal Tax Payment System (EFTPS), taxpayers can receive email notifications about their payments.

Selecting a tax professional

The IRS offers tips to help taxpayers choose a Tax Professional to assist in tax return preparation.

The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help taxpayers find tax return preparers who hold a professional credential recognized by the IRS or who have completed IRS requirements for the Annual Filing Season Program.

Taxpayer Bill of Rights

Taxpayers have fundamental rights under the law that protect them when they interact with the IRS. The Taxpayer Bill of Rights presents these rights in 10 categories. IRS Publication 1, Your Rights as a Taxpayer, highlights these rights and the agency’s obligation to protect them.

 

Missed Tax Deadline? Contact Us today with any questions!

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Michigan 1099-G Info for Identity Theft Victims

On April 11, 2022   /   Michigan Taxes  
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What Should I Do?

If you received a 1099-G and suspect that you may be the victim of identity theft, please complete these three steps:

Step 1

Complete a Form 6349, Statement of Identity Theft and submit it along with a detailed report to the Unemployment Insurance Agency (UIA).

After processing your report, UIA will send you a new 1099-G indicating the corrected amount of compensation.

Report Identity Theft to UIA Now

If you have questions about how to complete or submit the Form 6349, please call UIA at 1-866-500-0017.

Step 2

Receive a corrected 1099-G from UIA.

Step 3

After receiving your corrected 1099-G, send a copy of it to the Michigan Department of Treasury.

Ways to Send Your Corrected 1099-G to Treasury

Mail a copy of your corrected 1099-G to Treasury:

Michigan Department of Treasury

P.O. Box 30058

Lansing, MI 48909

Email a copy of your corrected 1099-G to Treasury:

Treas-1099gUIA@michigan.gov

 

Contact Us Today With Any Questions about Michigan 1099-G Info for Identity Theft Victims!

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6 Month Tax Extension announced by IRS

On April 4, 2022   /   IRS  
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A 6 Month Tax Extension was announced by the IRS for all taxpayers who use IRS Free File to request an extension.

WASHINGTON — The Internal Revenue Service reminds taxpayers that if they’re unable to file their tax return by this year’s April 18 deadline, there’s an easy, online option to get a 6 Month Tax Extension .

Taxpayers who need more time to complete their return can request an automatic six-month extension to file. An extension allows for extra time to gather, prepare and file paperwork with the IRS; however, taxpayers should be aware that:

  • An extension to file their return doesn’t grant them an extension to pay their taxes,
  • They should estimate and pay any owed taxes by their regular deadline to help avoid possible penalties and
  • They must file their extension no later than the regular due date of their return.

E-file an extension form for free

Individual tax filers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension. The fastest and easiest way to get an extension is through IRS Free File on IRS.gov. Taxpayers can electronically request an extension on Form 4868 PDF. Filing this form gives taxpayers until October 17 to file their tax return. To get the extension, taxpayers must estimate their tax liability on this form and should timely pay any amount due.

Get an extension when making a payment

Other fast, free and easy ways to get an extension include using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card or digital wallet. There’s no need to file a separate Form 4868 extension request when making an electronic payment and indicating it’s for an extension. The IRS will automatically count it as an extension.

Important reminders on extensions

The IRS reminds taxpayers that a request for an extension provides extra time to file a tax return, but not extra time to pay any taxes owed. Payments are still due by the original deadline. Taxpayers should file even if they can’t pay the full amount. By filing either a return on time or requesting an extension by the April 18 filing deadline, they’ll avoid the late-filing penalty, which can be 10 times as costly as the penalty for not paying.

Taxpayers who pay as much as they can by the due date, reduce the overall amount subject to penalty and interest charges. The interest rate is currently four percent per year, compounded daily. The late-filing penalty is generally five percent per month and the late-payment penalty is normally 0.5 percent per month.

The IRS will work with taxpayers who cannot pay the full amount of tax they owe. Other options to pay, such as getting a loan or paying by credit card, may help resolve a tax debt. Most people can set up a payment plan on IRS.gov to pay off their balance over time.

Other automatic extensions

Certain eligible taxpayers get more time to file without having to ask for extensions. These include:

  • U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico get an automatic 2-month extension to file their tax returns. They have until June 15 to file. However, tax payments are still due April 18 or interest will be charged.
  • Members of the military on duty outside the United States and Puerto Rico also receive an automatic two-month extension to file. Those serving in combat zones have up to 180 days after they leave the combat zone to file returns and pay any taxes due. Details are available in Publication 3, Armed Forces’ Tax Guide PDF.
  • When the President makes a disaster area declaration, the IRS can postpone certain taxpayer deadlines for residents and businesses in the affected area. People can find information on the most recent tax relief for disaster situations on the IRS website.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states.

If you need more information regarding the 6 Month Tax Extension please Contact Us Today!

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Last day to take money out of IRAs and 401(k)s

On March 29, 2022   /   IRS  
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IRS reminder to many retirees: April 1 is the last day to take money out of IRAs and 401(k)s

WASHINGTON — The Internal Revenue Service today reminded retirees who turned 72 during the last half of 2021 that, in most cases, Friday, April 1, 2022, is the last day to begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s and similar workplace retirement plans.

The payments, called required minimum distributions (RMDs), are normally made by the end of the year. But anyone who reached age 72 after June 30, 2021, is covered by a special rule that allows IRA account owners and participants in workplace retirement plans to wait until as late as April 1, 2022, to take their first RMD. In other words, in general, the special April 1 rule applies to IRA owners and other participants in these plans who were born after June 30, 1949.

Two payments in the same year

The April 1st last day to take money out of IRAs and 401(k)s deadline only applies to the required distribution for the first year. For all later years, the RMD must be made by December 31.

This means that taxpayers who turned 72 after June 30, 2021, and receive their first required distribution (for 2021) in 2022 on or before April 1, must receive their second RMD (for 2022) by December 31, 2022. Even though the first distribution is actually the required 2021 distribution, it’s taxable in 2022 and reported on the 2022 tax return – along with the regular 2022 distribution.

Types of retirement plans requiring RMDs

These required distribution rules apply to owners of traditional, SEP and SIMPLE IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans. RMDs don’t apply to Roth IRAs.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2021 RMD, required by April 1, 2022, the RMD amount is shown on the 2020 Form 5498, normally issued to the owner during the first part of 2021.

Some can delay RMDs

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD.

Most participants who are still working for that employer can wait until April 1 of the year after they retire to start receiving these distributions, if their workplace plan allows. This RMD exception does not apply to 5% owners of the business sponsoring the retirement plan or to participants in SEP and SIMPLE IRA plans. See Tax on Excess Accumulation in Publication 575 for details.

Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

IRS online tools and publications can help

Many answers to questions about RMDs can be found at RMD FAQs on IRS.gov. Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. Married taxpayers whose spouse is more than 10 years younger and is their only beneficiary use Table II.

Because this and other life expectancy tables were updated for 2022, recipients need to use a different version of this table to figure their 2021 RMD, compared to their 2022 RMD. The required withdrawals in 2022 and future years will generally be smaller.

For a 2021 RMD (due April 1, 2022), use the life expectancy tables in Appendix B of the Pub. 590-B PDF used for preparing 2020 returns. As shown in Table III, the RMD for a person age 72 in 2021 will normally be based on a distribution period of 25.6 years. Divide the December 31, 2020, balance by 25.6 to get the RMD for 2021.

For a 2022 RMD (due December 31, 2022), use the revised life expectancy tables in Appendix B of the Pub. 590-B PDF used for preparing 2021 returns. As shown in the revised Table III, the RMD for a person age 72 in 2022 will normally be based on a distribution period of 27.4 years. Divide the December 31, 2021, balance by 27.4 to get the RMD for 2022.

Pub. 590-B has worksheets, examples and other information that can help anyone figure their RMD. Visit IRS.gov for more information.

Again, April 1 is the last day to take money out of IRAs and 401(k)s.

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Michigan Power of Attorney Form – Taxes 2021

On March 20, 2022   /   Michigan Taxes  
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The state of Michigan has all information regarding the Authorized Representative Declaration (Power of Attorney Form) on their website at: www.Michigan.gov/taxes

Read more below:

MCL 205.28(1)(f) strictly prohibits employees of the Department of Treasury from disclosing confidential tax information to anyone other than the individual taxpayer or his or her authorized representative.

Authorized Representative Declaration (Power of Attorney) Form 151

Help Resources

Below are frequently asked questions to assist you in filling out the form, examples of what a completed form might look like as well as a new video explaining how to fill out the new form.

Frequently Asked Questions
Authorized Representative Declaration Video
Form 151 Business Example
Form 151 (Part 5, Section 8) Example
Form 151 Individual Income Tax Example

 

Request Copies of Tax Returns

Complete a 4095 Request for Disclosure of Tax Return and Tax Return Information to authorize the Department of Treasury, Office of Disclosure to provide copies of tax returns to yourself or your appointee. The Disclosure officer will complete the form along with the requested tax return information and return it to you or your appointee.

4095, Request and Consent for Disclosure of Tax Return and Tax Return Information

Authorize a Representative

If you wish to authorize another person or corporation, (tax preparer, family member, etc.,) as your representative in tax or debt matters before the State of Michigan, complete and file a form 151, Authorized Representative Declaration

151, Authorized Representative Declaration (Power of Attorney)

Request Information for Mortgage Companies

For specific use by Mortgage Companies and Financial Institutions in dealing with mortgages. You may complete and file a Limited Power of Attorney – Borrower’s Authorization for Disclosure of Information (form 4300) if you wish to have your mortgage company or financial institution contact the Michigan Department of Treasury on your behalf to obtain any and all information, including pay off amounts, for settlement of any outstanding tax lien(s) or debt obligations.

4300, Limited Power of Attorney – Borrower’s Authorization for Disclosure of Information

Written Authorization

205.8 Letters and notices sent to taxpayer’s official representative.

If a taxpayer files with the department a written request that copies of letters and notices regarding a dispute with that taxpayer be sent to the taxpayer’s official representative, the department shall send the official representative, at the address designated by the taxpayer in the written request, a copy of each letter or notice sent to the taxpayer. A taxpayer shall not designate more than 1 official representative under this section for a single dispute.

Disclosure Unit Information

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Michigan Homestead Property Tax Credit Claim Information

On March 14, 2022   /   Michigan Taxes  
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Mar-14-2021 – Michigan.gov/taxes

Listed below is the Michigan Homestead Property Tax Credit Claim Information for the tax year of 2021.

Prior to sending additional information for review, verify the following information:

  • Was all taxable and nontaxable income included in total household resources?
    • Yes, continue to next topic.
    • No, recalculate your homestead property tax credit using the correct amount of income. If you still disagree with the adjustments made, submit documentation to verify your income and property tax statements for the year in question, to Michigan Department of Treasury for review. Be sure to include a daytime phone number.

See the chart below to determine if some income was omitted on the original return and what information to send for documenting all sources of income.
Income includes, but is not limited to, the following:

Income Type Supporting Documentation
Wages, salaries, tips, etc. W-2(s) and/Of 1099(s)
Business Income (from Federal Schedule C, C-EZ, E or F) Business records used to prepare your return and/or 1099 payment document
Interest and/or dividends 1099-INT, 1099-DIV, etc.
Capital Gains U.S. Schedule D
Social Security, Supplemental Security Income(SSI) and/ or Retirement, Survivors, and Disability Insurance (RSDI) payments Statement from the Social Security Administration indicating amounts for yourself, your spouse and any claimed dependents.
Pension benefits (including nontaxable pensions) 1099-R
Railroad retirement benefits 1099-R
Veteran’s benefits Letter from the regional Veteran’s affairs office
Worker’s compensation 1099-R and/or W-2
Child Support Statement showing amount of support received for the year
Foster Care payments W -2. 1099. or other Statement from MDHHS
Adoption subsidy payments Annual statement
Cancellation of Debt Income (CODI) 1099-A and/Of 1099-C
Nontaxable gain from sale of primary residence See IRS Publication 523
Student grants/ scholarships 1098-T
FIP/MDHHS payments (Do not include food assistance) Annual statement
Rent/Bills paid on your behalf Statement from each person who gave assistance; include the total dollar amount given for the year, name, signature, date & contact information
Gifts of cash over $300 Statement from each person who gave assistance; include the total dollar amount given for the year, name, signature, date & contact information
Personal Loans – Including loans from relatives and/or friends* Signed statement showing the original amount of the loan and the terms of repayment.
Inheritance or proceeds of life insurance policy from decedent other than spouse Statement showing amount received for the year
Inheritance or proceeds of life insurance policy from deceased spouse* Statement showing amount received for the year
Food Assistance* Statement showing amount of assistance received for the year
Credit card and/or savings account* Statements from financial institution(s) indicating dates and amounts of disbursements received for the year. Statements should be from the beginning, middle and end of the year.
Student Loans* Statement from financial institution/lender indicating dates and amounts of disbursements.

*Note: This is not included as income, but can be used to show how living expenses were covered.

  • If you live in a village you may receive a separate property tax statement from the village itself in addition to summer and winter tax statements. Village taxes may be included on the homestead property tax credit.
  • Verify the correct statements were used

Use summer and winter property tax statements for the tax year in question no matter when the taxes were paid. (example: for the 2020 tax year use the 2020 summer and the 2020 winter property tax statements)

  • If Correct statements were used continue to next topic.
  • If Incorrect statements were used re-calculate the MI-1040CR using the correct summer and winter property tax statements and corresponding amounts. If you still disagree with the corrections made, submit your summer and winter property tax statements for the year in question to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the correct school district code was reported. (Line 4)

School District Code: If you are unsure of what your school district code is, please contact your county, city, township or village office. A list of school district codes can be found in the MI-1040 Instruction Booklet.

  • If Correct school district was reported continue to next topic.
  • If Incorrect school district was reported, submit your summer and winter property tax statements for the year in question to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the correct taxable value of your homestead was reported if you did NOT buy/sell your home. (Line 9)

Taxable Value: This can be found on your property tax statements sent to you by your county, city, township or village office. Do not use the State Equalized Value (SEV) or Assessed Value.

  • If Correct taxable value was reported, continue to next topic.
  • If Incorrect taxable value was reported, recalculate your property tax credit using the summer and winter property tax statements for the year in question. If you still disagree with the adjustments made, submit your summer and winter property tax statements to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the correct taxable value of your homestead was reported if you bought and/or sold your home. (Line 9)

Taxable Value: This can be found on your property tax statements sent to you by your county, city, township or village office. Do not use the State Equalized Value (SEV) or Assessed Value. NOTE: Homeowners who moved complete Part 3 (lines 45-51) of the MI-1040CR to determine the taxes that can be claimed.

  • If Correct taxable value was reported, verify your property taxes/rent was prorated correctly based on the time you occupied each home. If you still disagree with the adjustments made, submit your summer and winter property tax statements/lease agreements to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • If Incorrect taxable value was reported, recalculate your homestead property tax credit using your prorated share of property taxes/rent based on the time you occupied each home. If you still disagree with the adjustments made, submit your summer and winter property tax statements/lease agreements to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the taxes levied (billed) for the tax year in question were reported correctly. (Line 10)

Taxes Levied: You can only claim the amount of property taxes levied (billed) during the year in question, no matter when they were paid. Do not include special assessments or penalty/interest fees.

Do Not use property tax information from your mortgage statement, as this may contain taxes paid for a prior
tax year.

  • If Correct taxes levied amount was reported continue to next topic.
  • If Incorrect taxes levied (billed) amount was reported, recalculate your property tax credit using the correct
    taxes levied. If you still disagree with the adjustments made, submit your summer and winter property tax
    statements for the year in question to Michigan Department of Treasury for review. Be sure to include a
    daytime phone number.
  • Verify the taxes levied (billed) and reported for the tax year in question did not include special assessments and/or penalty/interest. (Line 10)

Special assessments and/or penalty/interest must be subtracted from the property taxes. Special assessments may include recycling, garbage/rubbish removal, street lights, sidewalks, drains, etc. These are not charged based on a millage rate; therefore they cannot be included in the credit computation.

  • If Special assessments and/or penalty/interest were not included, continue to next topic.
  • If Special assessments and/or penalty/interest were included, recalculate the homestead property tax credit using the correct amount of taxes levied by subtracting the special assessments and penalty/interest from total taxes. If you still disagree with the adjustments made, submit your summer and winter property tax statements for the year in question to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Did you move during the year?
  • If Yes, the property taxes for both homes must be prorated. Complete Part 3 (lines 45-51) of the MI-1040CR
    to determine the taxes that can be claimed. Use only taxes levied in the year of the claim, then prorate taxes
    based on days you owned and occupied the home as your principal residence. Do not include the taxes listed
    on your settlement statement. You may not claim more than 365 days total. If you sold a home, you must also include the capital gain from the sale of your home in total household resources even if the capital gains are not included in adjusted gross income.
  • If No, continue to next topic.
  • What was the principal residence exemption (P.R.E.) percentage on the property?
  • 100% P.R.E. means that your property is exempt from school operating tax.
  • Between 1% and 99% P.R.E. means that part of your property is not used as your principal residence and your property is subject to a portion of school operating tax.

For example, if you use 10% of your property as a business, then your principal residence exemption would be 90%. You cannot claim the school operating tax for the property tax credit because that is taxed to the business on your property. After subtracting the school operating tax from your property tax bill, you can claim 90% of the remaining property tax for the credit.

How to compute your homestead property tax credit, if your P.R.E is between 1% and 99% P.R.E.

Total taxes levied for tax year $1,348
Subtract School Operating Tax – $123
Total $1,225
Multiply by percentage declared as P.R.E. x 90%
Amount of taxes that can be claimed $1,102

 

  • 0% P.R.E. means that you have not claimed a principal residence exemption and all of your property is subject to school operating tax. If you own and occupy the property as your home, you should file a Principal Residence Exemption Affidavit (Form 2368) with your county, city, township or village and submit your summer and winter property tax statements to Michigan Department of Treasury for review. Please note that a second home or a vacation home does not meet the qualifications of a principal residence.
  • Do you share ownership of your home?

If two or more individuals share ownership and occupy the homestead each may file a homestead property tax credit.  The
claim must be based only on his/her prorated share of the taxable value and property taxes and his/her own total household
resources. Property taxes levied must be divided equally between each individual.
Note: Any gifts of cash or expenses paid on your behalf must be included in total household resources.
If you still disagree with the adjustment, respond in writing, along with a copy of your summer and winter property tax statements for the year in question, a daytime phone number and a copy of the adjustment message/letter you received to:

Michigan Department of Treasury
P O Box 30058
Lansing MI 48909

Allow up to 90 days after your correspondence has been imaged onto our system for review. You will be notified in writing upon completion.

For the status of correspondence visit e-Services.

 

Contact Us with any questions regarding the Michigan Homestead Tax credit

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In person IRS Assistance

On March 8, 2022   /   IRS  
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In person IRS Assistance available in more than 30 cities on Saturday, March 12

WASHINGTON — (In person IRS Assistance) The Internal Revenue Service today announced that many Taxpayer Assistance Centers (TACs) will offer face-to-face Saturday help without an appointment from 9 a.m. to 4 p.m. on Saturday, March 12. Normally TACs are only open weekdays.

“Being open on select Saturdays is offered for people to get the help they need when they need it,” said IRS Wage and Investment Division Commissioner and Taxpayer Experience Officer Ken Corbin. “We know that many taxpayers work during the week or have other obligations that make it difficult to get away to take care of their taxes during our routine business hours. We’re here to help, and people don’t need an appointment during these special Saturday hours.”

People can also ask about reconciling advance Child Tax Credit payments, receive help resolving a tax problem, a tax bill or an IRS audit. If assistance from IRS employees specializing in these services is not available, the individual will receive a referral for these services. IRS staff will schedule appointments for a later date for Deaf or Hard of Hearing individuals who need sign language interpreter services. Foreign language interpreters will be available.

The IRS follows Centers for Disease Control social distancing guidelines for COVID-19, and availability may change without notice. People are required to wear face masks and social distance at these events.

Please come prepared

The IRS urges individuals to bring the following information:

  • Current government-issued photo identification
  • Social Security cards and/or ITINs for members of their household, including spouse and dependents (if applicable)
  • Any IRS letters or notices received and related documents

During the visit, IRS staff may also request the following information:

  • A current mailing address, and
  • Bank account information, to receive payments or refunds by Direct Deposit.

No tax return preparation will be available at any IRS TAC. The IRS.gov webpage, Contact Your Local IRS Office, lists all services provided at specific TACs.

Free tax preparation help

While tax return preparation is not a service offered at IRS TACs during regular hours or during these Saturday hours, the following free resources are available to help most taxpayers prepare and file their 2021 federal tax returns anytime:

Any individual or family earning $73,000 or less in 2021 can use tax software from providers who make their online products available through IRS Free File at no cost. There are products in English and Spanish.

Free help preparing tax returns is available at a Volunteer Income Tax Assistance Center (VITA) or Tax Counseling for the Elderly location (TCE) sites. The income limit for VITA assistance is $58,000. To find the closest free tax return preparation help, use the VITA Locator Tool or call 800-906-9887. To find a TCE AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.

More information:

 

 

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Interest rates increase for the second quarter of 2022

On March 1, 2022   /   IRS  
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Interest rates increase for the second quarter of 2022 – IR-2022-42, February 23, 2022

WASHINGTON — The Internal Revenue Service today announced that interest rates will increase for the calendar quarter beginning April 1, 2022. The rates will be:

  • 4% for overpayments (3% in the case of a corporation);
  • 1.5% for the portion of a corporate overpayment exceeding $10,000;
  • 4% for underpayments; and
  • 6% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during January 2022 to take effect February 1, 2022, based on daily compounding.

Revenue Ruling 2022-05 PDF announcing the rates of interest, will appear in Internal Revenue Bulletin 2022-10, dated March 7, 2022.

 

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