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Michigan Small Business Taxpayer Exemptions

On January 16, 2023 / Michigan Taxes

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Michigan Small Business Tax Exemptions

Is your Michigan business exempt from Taxes? Here is a list of all exemptions. Continue reading to see if you are exempt.

Questions? Contact ATS Advisors of Michigan

Common Michigan Small Business Taxpayer Exemptions:

501(c)(3) and 501(c)(4) Organizations

501(c)(3) and 501(c)(4) organizations must provide proof that they are exempt under these codes by the Internal Revenue Service. In addition to this they must provide a certificate of exemption stating that the property will be used or consumed in carrying out the operations of the organization. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Churches

Sales to organized churches or houses of religious worship are exempt from sales tax. These exempt sales must not involve property used in commercial enterprises. Vans or buses may be purchased exempt if the manufacturer’s rated seating capacity is 10 or more and it is used primarily for transportation of persons for religious purposes. Churches may not purchase any other type of vehicle exempt. Anyone who is directly engaged in the business of constructing, altering, repairing, or improving real estate for a church or a house of religious worship is liable for the sales tax on the inventory value of the materials affixed to the property, even if the church purchases the materials. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Government

Sales to the United States government, the State of Michigan and its political subdivisions, departments and institutions are not subject to tax, if the sales are ordered on the government form or purchase order and are paid for directly to the seller by warrant on government funds. Sales to the American Red Cross, and its chapters and branches are exempt. All sales to other states or countries are subject to Michigan sales tax. Sales to employees of the government for their own use are subject to tax. The exemption certificate is 3372 Michigan Sales and Use Tax Certificate of Exemption.

Hospitals

Sales to hospitals are exempt from sales tax when the organization is not operated for profit. The income or benefit from the operation must not inure to any individual or private shareholder, directly or indirectly. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Industrial Processors

An industrial processing exemption is allowed for property which is used or consumed in transforming, altering, or modifying tangible personal property by changing the form, composition, or character of the property for ultimate sale at retail or for sale to another processor for further processing and ultimate sale at retail. The industrial processing exemption does not include property which is or becomes affixed to real estate, office supplies, administrative office equipment, or vehicles licensed for public highway use, except when the vehicle is used to mix and agitate materials added at the plant or job site in the concrete manufacturing process. Industrial processing also does not include the receipt or storage of raw materials extracted by the user or consumer or the preparation of food or beverages by a retailer for retail sale. The exemption certificate is 3372 Michigan Sales and Use Tax Certificate of Exemption .

Retailers

Retailers purchasing for resale should provide a signed exemption certificate by completing form 3372 Michigan Sales and Use Tax Certificate of Exemption and check box 1. For Resale at Retail in Section 3, Basis for Exemption Claim. Their sales tax license number must be included in the blank provided on the exemption claim. However, a seller should not accept the sales tax license number alone as a claim of exemption. The department does not issue tax-exempt numbers.

Schools

Sales to schools and parent cooperative preschools are exempt from sales tax when the organization is not operated for profit. The income or benefit from the operation must not inure to any individual or private shareholder, directly or indirectly. PTA, PTO, and all other groups and organizations must qualify separately for exemption when making purchases for their organizations. Sales to teachers are subject to tax. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Wholesalers

Wholesalers purchasing for resale should provide the seller with a completed form 3372 Michigan Sales and Use Tax Certificate of Exemption and check the box for Resale at Wholesale. Sales tax licenses are not issued to wholesalers.

-Michigan Small Business Taxpayer Exemptions-

Additional Exemptions and Deductions

Exemption Notices

Notice to Taxpayers Regarding Sales and Use Tax Exemptions for Feminine Hygiene Products

Sales and Use tax exemption for Transformational Brownfield Plans

Notice Regarding Data Center Exemption

Third-Party Lenders – Bad Debt Deductions

Effective October 1, 2009, a bad debt deduction may be claimed by a third-party lender or a retailer, provided that the retailer who reported the tax and the third-party lender financing the sale execute and maintain a written election designating which party is entitled to claim the deduction. There is no Treasury form to make this election. However, the election must be written, must be signed by both parties, and must clearly and unequivocally state which party is entitled to the deduction; the mere assignment of the right to the debt alone does not satisfy the written election requirement. The election must be executed before the bad debt is incurred.

The written election must be retained by the parties and made available to the Department upon request or audit. In addition to the written election, the following conditions must also be met:

No deduction or refund was previously claimed or allowed on any portion of the account receivable.
The account receivable has been found worthless and written off by the seller that made the sale or by the lender on or after September 30, 2009.
The bad debt is eligible to be claimed, in accordance with the taxpayer’s accounting method, as a deduction under Section 166 of the Internal Revenue Code, 26 USC 166, or would be recognized as a bad debt if the claimant were a corporation.

A party making a refund claim must provide the written election to the Department with its refund request. A request for a refund based on bad debt incurred from the sale of motor vehicle must include a copy of the RD-108 for that vehicle.

For purposes of this deduction, “lender” includes any of the following:

A person that holds or held an account receivable that was purchased directly from the taxpayer that reported the tax.
Any person that holds or held an account receivable pursuant to that person’s contract directly with the taxpayer that reported the tax.
The issuer of a private label credit card that may only be used to make purchases from the vendor whose name or logo appears on the card or instrument.

The following amounts shall not be included as bad debt:

Interest or finance charges.
Sales or use tax charged or collected on the original sale.
Uncollectible amounts on property that remains in possession of the seller until the full purchase price is paid, e.g., property placed on layaway.
Expenses incurred in attempting to collect any account receivable or any portion of an account that is subsequently recovered.
Sales tax charged on property that is subsequently repossessed.
Any debt or account receivable that was sold, assigned, or transferred to, and remains in the possession of, a third party for collection.
A sale where the tax was remitted to the Department after the expiration of the applicable statute of limitations.

Source MCL 205.54i; MCL 205.99.

Interstate (Fleet) Motor Carriers Exemption

Michigan provides a sales and use tax exemption to interstate (fleet) motor carriers for rolling stock and parts affixed to rolling stock that are purchased, rented or leased by an interstate (fleet) motor carrier and used in interstate commerce. The exemption is for the purchase or use of qualified trucks and trailers (and parts affixed to them) that are purchased, leased, or rented after April 30, 1999. For additional information please refer to Internal Policy Directive 2003-1 and Internal Policy Directive 2010-1.

Interstate (fleet) motor carriers who qualify for exemption may claim exemption from sales or use tax by providing the seller or lessor with the prescribed Michigan Sales and Use Tax Certificate of Exemption, form 3372. The buyer or lessee would check the box “Rolling Stock purchased by an Interstate Motor Carrier”.

Use Tax Exemption on Vehicle Title Transfers

Michigan grants an exemption from use tax when the buyer and seller have a qualifying family relationship.

Read the brochure for details

– Michigan Small Business Taxpayer Exemptions –

Common Questions and Answers:

Can a customer instruct a seller not to charge sales or use tax because they will pay it directly to Michigan?

Yes, if the customer is authorized by Treasury and has a “direct pay permit” that covers the property purchased or leased. The customer must provide to the seller a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, or the required information in another acceptable format. See Revenue Administrative Bulletin (RAB) 2016-14. When stating its basis for claiming an exemption, the customer should state, “Authorized to pay sales or use taxes on purchases of tangible personal property directly to the State of Michigan” and must include its account number.

Does Michigan issue tax exempt numbers? If not, how do I claim an exemption from sales or use tax?

The Michigan Department of Treasury does not issue tax exempt numbers. In order to claim an exemption from sales or use tax, a purchaser must provide a valid claim of exemption to the vendor by completing one of the following:

Michigan Sales and Use Tax Certificate of Exemption (Form 3372)
Multistate Tax Commission’s Uniform Sales and Use Tax Certificate
Streamlined Sales and Use Tax Agreement Certificate or the same information in another format.

Note: A seller should not solely accept an FEIN as evidence of exemption from sales and use taxes.

How do I claim a valid exemption with my supplier?

To claim exemption, a purchaser must provide the supplier with one of the following:

Michigan Sales and Use Tax Certificate of Exemption (Form 3372)
Multistate Tax Commission’s Uniform Sales and Use Tax Certificate
Streamlined Sales and Use Tax Agreement Certificate or the same information in another format

Is manufacturing equipment tax exempt?

Michigan provides an exemption from sales or use tax on machinery or equipment used in industrial processing and in their repair and maintenance. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.

For further information on exemptions refer to Revenue Administrative Bulletin 2000-4.

Are purchases made for agricultural production tax exempt?

Michigan provides an exemption from sales or use tax on tangible personal property used in tilling, planting, caring for or harvesting things of the soil, in the breeding, raising or caring of livestock poultry or horticultural products for further growth. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.

For further information on exemptions refer to Qualified Agricultural Property Exemption Guidelines.

Is my purchase of a truck or trailer considered “rolling stock” and exempt from tax?

NOTE: Your first tractor/trailer lease/purchase IS NOT EXEMPT from Michigan sales or use tax.

In order to be exempt from Michigan sales or use tax certain criteria must be met. Exemption is allowed in Michigan on the sale of rolling stock purchased by an interstate motor carrier or for the rental or lease of rolling stock to an interstate motor carrier and used in interstate commerce.

According to MCL 205.54r,

Rolling stock means a qualified truck, a trailer designed to be drawn behind a qualified truck, and parts affixed to either a qualified truck or a trailer designed to be drawn behind a qualified truck.
Interstate motor carrier means a person engaged in the business of carrying persons or property, other than themselves, their employees, or their own property, for hire across state lines, whose fleet mileage was driven at least 10% outside of this state in the immediately preceding tax year.
Qualified truck means a commercial motor vehicle power unit that has 2 axles and a gross vehicle weight rating in excess of 10,000 pounds or a commercial motor vehicle power unit that has 3 or more axles.

Motor carriers who qualify may claim exemption from sales or use tax by providing the seller or lessor with the prescribed Form 3372, Michigan Sales and Use Tax Certificate of Exemption. The buyer or lessee would check the box “Rolling Stock purchased by an Interstate Motor Carrier”.

Is a vehicle purchased by a church tax exempt?

ONLY vans or buses may be purchased exempt if the manufacturer’s rated seating capacity is 10 or more and it is used primarily for transportation of persons for religious purposes.

I am a 501(c)(3)/501(c)(4) Organization, how do I claim exemption from Michigan Sales and Use Tax?

Organizations exempted by statute, organizations granted exemption from federal income tax under Internal Revenue Code Section 501(c)(3) or 501(c)(4), or organizations that had received an exemption letter from the Michigan Department of Treasury prior to June 1994 are entitled to sales and use tax exemption in the State of Michigan.

Please refer to Revenue Administrative Bulletin (RAB) 1995-3 for more information on the exemption from Michigan sales and use tax as it relates to nonprofit entities.

In order to claim exemption, the nonprofit organization must provide the seller with both:

A completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption
Evidence of nonprofit eligibility:
- Either the letter issued by the Department of Treasury (prior to June 1994),or
- Your federal determination as a 501(c)(3) or 501(c)(4) organization.

How do I obtain a tax exempt number to claim an exemption from Sales or Use Tax?

The Michigan Department of Treasury does not issue “tax exempt numbers”.

Form 3372, Michigan Sales and Use Tax Certificate of Exemption, is used to claim exemption from Michigan Sales and Use Tax. The buyer must present the seller with a completed form at the time of purchase. For more information on exemption requirements and the procedures to claim an exemption see Revenue Administrative Bulletin 2002-15.

A customer is providing me with their tax exempt number as proof that they do not have to pay sales tax on their purchase; is this correct/valid?

The Department of Treasury does not issue or accept tax exempt numbers. Sellers should not accept a tax exempt number as evidence of exemption from sales and use tax.

To claim exemption for purchases, the buyer must present the seller with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption. The seller will retain the certificate in their records.

I am a retailer, how do I claim a resale exemption with my supplier?

To claim exemption, a retailer must provide the supplier with a completed Form 3372 , Michigan Sales and Use Tax Certificate of Exemption, indicating that the purchase is for “Resale at Retail”. Their sales tax license number must be included in the space provided.

NOTE: A seller should not accept a FEIN as evidence of exemption from sales and use taxes without Form 3372.

Michigan Small Business Taxpayer Exemptions

Tax Bracket 2022 Head of Household

On January 9, 2023 / IRS

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Tax Bracket 2022 Head of Household – Need Michigan Tax Help? Contact ATS Advisors today!

2022 Tax Rates and Brackets

When you’re working on your 2022 federal income tax return next year, here are the tax brackets and rates you’ll need based on your filing status:

**Single Filers and Married Couples Filing Jointly**
Tax Rate	Taxable Income (Single)	Taxable Income (Married Filing Jointly)
10%	Up to $10,275	Up to $20,550
12%	$10,276 to $41,775	$20,551 to $83,550
22%	$41,776 to $89,075	$83,551 to $178,150
24%	$89,076 to $170,050	$178,151 to $340,100
32%	$170,051 to $215,950	$340,101 to $431,900
35%	$215,951 to $539,900	$431,901 to $647,850
37%	Over $539,900	Over $647,850

**Married Couples Filing Separately and Head-of-Household Filers**
Tax Rate	Taxable Income (Married Filing Separately)	Taxable Income (Head of Household)
10%	Up to $10,275	Up to $14,650
12%	$10,276 to $41,775	$14,651 to $55,900
22%	$41,776 to $89,075	$55,901 to $89,050
24%	$89,076 to $170,050	$89,051 to $170,050
32%	$170,051 to $215,950	$170,051 to $215,950
35%	$215,951 to $323,925	$215,951 to $539,900
37%	Over $332,925	Over $539,900

2023 Tax Rates and Brackets

If you’re already thinking about how to handle your 2023 finances in a tax-efficient way — even though it’s still only 2022 – here are the 2023 federal income tax brackets and rates for the four most common filing statuses:

Single Filers and Married Couples Filing Jointly
Tax Rate	Taxable Income (Single)	Taxable Income (Married Filing Jointly)
10%	Up to $11,000	Up to $22,000
12%	$11,001 to $44,725	$22,001 to $89,450
22%	$44,726 to $95,375	$89,451 to $190,750
24%	$95,376 to $182,100	$190,751 to $364,200
32%	$182,101 to $231,250	$364,201 to $462,500
35%	$231,251 to $578,125	$462,501 to $693,750
37%	Over $578,125	Over $693,750

Married Couples Filing Separately and Head-of-Household Filers
Tax Rate	Taxable Income (Married Filing Separately)	Taxable Income (Head of Household)
10%	Up to $11,000	Up to $15,700
12%	$11,001 to $44,725	$15,701 to $59,850
22%	$44,726 to $95,375	$59,851 to $95,350
24%	$95,376 to $182,100	$95,351 to $182,100
32%	$182,101 to $231,250	$182,101 to $231,250
35%	$231,251 to $346,875	$231,251 to $578,100
37%	Over $346,875	Over $578,100

Inflation’s Impact on the 2023 Brackets

Since inflation has been high over the past year or so, the inflation adjustments impacted the tax brackets more this year than what we’re used to seeing. This shows up when we look at the “width” of the 2023 brackets and see that they got comparatively wider than before. (By width, we mean the amount of income taxed at the applicable rate – so the difference between the bracket’s lowest dollar amount and its highest dollar amount.

Take, for example, the 22% bracket for single taxpayers. For the 2021 tax year, the bracket ranged from $40,526 to $86,375 and covered $45,849 of taxable income ($86,375 – $40,526 = $45,849). For 2022, the 22% bracket for singles goes from $41,776 to $89,075 and covers $47,299 of taxable income ($89,075 – $41,776 = $47,299). So, from 2021 to 2022, the 22% bracket for single filers got $1,450 wider ($47,299 – $45,849 = $1,450).

For 2023, however, the width of the 22% singles bracket grew by more than twice as much. The 2023 bracket covers $50,649 of taxable income ($95,375 – $44,726 = $50,649), which is $3,350 wider than for 2022.

But that’s OK – wider tax brackets are a good thing, because it helps prevent “bracket creep.” When a bracket gets wider, there’s less of a chance that you’ll end up in a higher tax bracket if your income stays the same or doesn’t grow at the rate of inflation from one year to the next.

How the Tax Brackets Work

Suppose you’re single and end up with $100,000 of taxable income in 2022. Since $100,000 is in the 24% bracket for singles, will your 2022 tax bill simply a flat 24% of $100,000 – or $24,000? No! Your tax is actually less than that amount. That’s because, using marginal tax rates, only a portion of your income is taxed at the 24% rate. The rest of it is taxed at the 10%, 12%, and 22% rates.

How Much Is Your Standard Deduction?

Here’s how it works. Again, assuming you’re single with $100,000 taxable income in 2022, the first $10,275 of your income is taxed at the 10% rate for $1,028 of tax. The next $31,500 of income (the amount from $10,276 to $41,775) is taxed at the 12% rate for an additional $3,780 of tax. After that, the next $47,300 of your income (from $41,776 to $89,075) is taxed at the 22% rate for $10,406 of tax. That leaves only $10,925 of your taxable income (the amount over $89,075) that is taxed at the 24% rate, which comes to an additional $2,622 of tax. When you add it all up, your total 2022 tax is only $17,836. (That’s $6,164 less than if a flat 24% rate was applied to the entire $100,000.)

Now, suppose you’re a millionaire. (We can all dream, right?) If you’re single, only your 2022 income over $539,900 is taxed at the top rate (37%). The rest is taxed at lower rates as described above. So, for example, the tax on $1 million for a single person in 2022 is $332,955. That’s a lot of money, but it’s still $37,045 less than if the 37% rate were applied as a flat rate on the entire $1 million (which would result in a $370,000 tax bill).

Capital Gains Tax Rates

It’s important to note that the tax rates on capital gains from the sale of stocks, bonds, cryptocurrency, real estate, and other capital assets aren’t necessarily the same as the tax rates mentioned above for wages, interest, retirement account withdrawals, and other “ordinary” income. When determining the tax on capital gains, the rates that apply generally depend on how long you held the capital asset before selling it.

Capital Gains Tax on Real Estate

If you hold a capital asset for one year or less, any gain from the sale is considered short-term capital gain and taxed using the rates for ordinary income listed above. However, if you hold the asset for more than one year, the gain is treated as long-term capital gain and taxed a lower rate – either 0%, 15%, or 20%. As with the ordinary tax rates and brackets, which specific long-term capital gains tax rate applies depends on your taxable income. However, the long-term capital gain brackets are set up so that you’ll generally pay tax at a lower rate than if the ordinary tax rates and brackets were applied.

For more on the taxation of capital gains, see Capital Gains Tax 101.

States Sending Stimulus Checks

“What Are the Income Tax Brackets for 2022 vs. 2023?” – Mengle, Rocky. 2023. Kiplinger.com.

Tax Bracket 2022 Head of Household

Step by Step Michigan Unemployment Tax Form 2022

On January 1, 2023 / Michigan Taxes

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LEO Dec.2022 – Michigan Unemployment Tax Form 2022

Claimants have until Jan. 2 2023, to select electronic delivery option

As tax season approaches, the Michigan Unemployment Insurance Agency (UIA) reminds those who were paid jobless benefits this year to choose one of two options for getting a copy of their 1099-G tax form. You can receive an electronic copy accessible online or a paper copy sent by mail to the address on file with UIA.

Unemployment benefits are taxable, so payments received in 2022 must be reported on state and federal tax returns. Anyone who received jobless benefits this year will receive Form 1099-G Certain Government Payments as proof of income and how much income tax was withheld this year.

Claimants have until Jan. 2, 2023, to request to that an electronic version of their 1099-G be posted to their Michigan Web Account Manager (MiWAM) account. To change your preference:

Log into your MiWAM account at MiLogin.Michigan.gov.
Under the Account Alerts tab, click on “Request a delivery preference for Form 1099-G.”
If your Account Alerts tab doesn’t have a 1099-G link, click on the Claimant Services tab; then select “Delivery Preference for Form 1099-G.”

Statements will be available to view or download by the end of January 2023. Here’s how to access it online:

Go to the “I Want To” heading in MiWAM.
Click on the “1099-G” link.
Click on the 1099-G letter for the 2022 tax year.

Those who do not request an electronic 1099-G form will have a paper copy sent to them at the end of January through the U.S. postal mail to the address listed on their MiWAM account. If you moved in the past year, be sure to update your mailing address in MiWAM to receive your tax form at the correct address.

UIA’s Your 1099-G Tax Form webpage answers key questions claimants may have.

If the 1099-G that you receive lists an incorrect amount in “total payment” or “tax withheld,” you can request a revised form by downloading and completing Form UIA 1920, Request to Correct Form 1099-G. Then, mail the form to:

Unemployment Insurance Agency, 1099-G

P.O. Box 169

Grand Rapids, MI 49501-0169.

Or Fax it to 1-517-636-0427.

Timely access to tax forms is a tenet of UIA Director Julia Dale’s wide-ranging reform of the agency, including providing exemplary customer service, fighting fraud, and instilling a human-centered approach to interactions with workers and employers. Since Dale was named director in October 2021, she has:

Announced a replacement for the agency’s decade-old computer system with a user-friendly, state-of-the-art interface for claimants and businesses. A new system will allow for quick analysis of data that is currently not possible and timely program adjustments as economic conditions change.
Approved more than 76,000 overpayment waivers this year of state and federal benefits paid out during the pandemic to Michigan workers and totaling more than $555 million.
Obtained two federal approvals for a pause on certain collections for those facing overpayments.
Secured a $6.8 million equity grant from the U.S. Department of Labor (DOL) to make it easier for workers in underserved communities to access jobless benefits.
Reassigned staff and resources to address the largest categories of claims that are contributing to the agency’s case backlog.
Implemented new ethics and security clearance policies for employees and contractors.
Redesigned the agency’s public website at Michigan.gov/UIA for easier use on mobile phones and tablets.
Rebuilt to nearly $1.8 billion (and growing) the UI Trust Fund from which weekly benefits are paid to workers who lose their job through no fault of their own.
Worked to simplify its correspondence using a human-centered approach to make letters easier to understand for claimants and employers.

Questions? Contact ATS Advisors

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EITC 2022 Qualifications

On December 19, 2022 / IRS

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EITC 2022 Qualifications

Low- to moderate-income workers with qualifying children may be eligible to claim the Earned Income Tax Credit (EITC) if certain qualifying rules apply to them.

You may qualify for the EITC even if you can’t claim children on your tax return. Find out how to claim the EITC without a qualifying child.

Basic Qualifying Rules

To qualify for the EITC, you must:

Have worked and earned income under $57,414
Have investment income below $10,000 in the tax year 2021
Have a valid Social Security number by the due date of your 2021 return (including extensions)
Be a U.S. citizen or a resident alien all year
Not file Form 2555 (related to foreign earned income)

Special Qualifying Rules

The EITC has special qualifying rules for:

If you’re unsure if you qualify for the EITC, use our Qualification Assistant.

Valid Social Security Number

To qualify for the EITC, everyone you claim on your taxes must have a valid Social Security number (SSN). To be valid, the SSN must be:

Valid for employment
Issued before the due date of the tax return you plan to claim (including extensions)

For the EITC, we accept a Social Security number on a Social Security card that has the words, “Valid for work with DHS authorization,” on it.

For the EITC, we don’t accept:

Individual taxpayer identification numbers (ITIN)
Adoption taxpayer identification numbers (ATIN)
Social Security numbers on Social Security cards that have the words, “Not Valid for Employment,” on them

For more information about the Social Security number rules for the EITC, see Rule 2 in Publication 596, Earned Income Credit.

Filing Status

In 2021, to qualify for the EITC, you can use one of the following statuses:

Married filing jointly
Head of household
Qualifying widow or widower
Single
Married filing separate

You can claim the EIC if you are married, not filing a joint return, had a qualifying child who lived with you for more than half of 2021, and either of the following apply.

You lived apart from your spouse for the last 6 months of 2021, or
You are legally separated according to your state law under a written separation agreement or a decree of separate maintenance and you didn’t live in the same household as your spouse at the end of 2021.

If you’re unsure about your filing status, use our EITC Qualification Assistant or the Interactive Tax Assistant.

There are special rules if you or your spouse are a nonresident alien.

Head of Household

You may claim the Head of Household filing status if you’re not married and pay more than half the costs of keeping up your home where you live with your qualifying child.

Qualifying Widow or Widower

To file as a qualifying widow or widower, all the following must apply to you:

You could have filed a joint return with your spouse for the tax year they died. It does not matter if you filed a joint return.
Your spouse died less than 2 years before the tax year you’re claiming the EITC and you did not remarry before the end of that year
You paid more than half the cost of keeping up a home for the year
You have a child or stepchild you can claim as a relative. This does not include a foster child.
This child lived in your home all year, except for temporary absences. Note: There are exceptions for a child who was born or died during the year and for a kidnapped child. For more information, see Qualifying Child Rules, Residency.

Keeping up a Home

If you paid more than half the total cost to keep up a home during the tax year you file your taxes, you meet the requirement of paying more than half the cost of keeping up the home.

Costs include:

Rent, mortgage interest, real estate taxes and home insurance
Repairs and utilities
Food eaten in the home
Some costs paid with public assistance

Costs don’t include:

Money you got from Temporary Assistance for Needy Families or other public assistance programs
Clothing, education and vacations expenses
Medical treatment, medical insurance payments and prescription drugs
Life insurance
Transportation costs like insurance, lease payments or public transportation
Rental value of a home you own
Value of your services or those of a member of your household

U.S. Citizen or Resident Alien

To claim the EITC, you and your spouse (if filing jointly) must be U.S. citizens or resident aliens.

If you or your spouse were a nonresident alien for any part of the tax year, you can only claim the EITC if your filing status is married filing jointly and you or your spouse is a:

U.S. Citizen with a valid Social Security number or
Resident alien who was in the U.S. at least 6 months of the year you’re filing for and has a valid Social Security number

Claim the EITC Without a Qualifying Child

You are eligible to claim the EITC without a qualifying child if you meet all the following rules. You (and your spouse if you file a joint tax return) must:

Meet the EITC basic qualifying rules
Have your main home in the United States for more than half the tax year
- The United States includes the 50 states, the District of Columbia and U.S. military bases. It does not include U.S. possessions such as Guam, the Virgin Islands or Puerto Rico
Not be claimed as a qualifying child on anyone else’s tax return
Be at least age 18 at the end of the tax year (usually Dec. 31)
- The minimum age to claim the EIC is generally age 19; however, if you are a qualified former foster youth or a qualified homeless youth, you need to be at least age 18.
- If you are a specified student (other than a qualified former foster youth or a qualified homeless youth), you need to be at least age 24.

When You Will Get Your Refund

The IRS expects most EITC/Additional CTC related refunds to be available in taxpayer bank accounts or on debit cards by March 1, if they chose direct deposit and there are no other issues with their tax return. However, some taxpayers may see their refunds a few days earlier. Check Where’s My Refund? or the IRS2Go mobile app to check your refund status.

Other Credits You May Qualify For

If you qualify for the EITC, you may also qualify for other tax credits.

Questions? Contact ATS Advisors

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2022 Taxes For Venmo & Other Third Party Networks

On December 13, 2022 / IRS

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2022 Taxes For Venmo & Other Third Party Networks. – DEC 10. – CNBC

KEY POINTS

If you’ve accepted payments via apps such as Venmo or PayPal in 2022, you may receive Form 1099-K in early 2023, which reports income from third-party networks.
For 2022, you may receive the form for even a single transaction over the $600 threshold, but the change doesn’t apply to personal transfers.
Experts say it’s possible to reduce your tax liability through business deductions and retirement plan contributions.

If you’ve accepted payments via apps such as Venmo or PayPal in 2022, you may receive Form 1099-K, which reports income from third-party networks, in early 2023. But there’s still time to reduce your tax liability, according to financial experts.

“There’s no change to the taxability of income,” the IRS noted in a release Tuesday about preparing for the upcoming tax season. “All income, including from part-time work, side jobs or the sale of goods is still taxable,” the agency added.

Before 2022, you may have received a 1099-K if you had more than 200 transactions worth an aggregate above $20,000. But the American Rescue Plan Act of 2021 slashed the threshold to just $600, and even a single transaction can trigger the form.

While the change targets business transactions, not personal transfers, experts say it’s possible some taxpayers will receive 1099-Ks by mistake. If this happens, the IRS says to contact the issuer or make adjustments to your tax return.

Either way, the IRS urges “early filers” to make sure they have all tax forms, including 1099-Ks, before submitting their return.

Whether you work with a professional or self-prepare taxes, you need to be ready, said Albert Campo, a certified public accountant and president of AJC Accounting Services in Manalapan, New Jersey.

Here’s what to know about reporting 1099-K payments on your return and how to reduce your tax liability.

How to report 1099-K payments and claim deductions

You can report 1099-K payments as income on Schedule C of your tax return, which covers profits and losses for sole proprietor businesses.

You’ll have the chance to subtract expenses, known as business deductions, on Part II of Schedule C, including things like the costs of your products, the portion of your internet and phone bills used for business, travel, possibly your home office and other expenses.

You can report 1099-K payments as income on Schedule C of your tax return, which covers profits and losses for sole proprietor businesses.

Jim Guarino, a certified financial planner, CPA and managing director at Baker Newman Noyes in Woburn, Massachusetts, said it’s good to begin reviewing possible business deductions now — including gathering your receipts for each one — to get organized before tax season kicks off.

If you’re paying for your own health insurance, there’s also a chance to deduct the cost of your premiums on Schedule 1, which reduces your adjusted gross income, Guarino said. This won’t apply if an employer provides your health coverage.

Consider a retirement account for your business

Another way to reduce your tax liability is by opening and contributing to a self-employed retirement plan, which is also reported as an “adjustment to income” on Schedule 1.

One option is a Solo 401(k), which covers one participant and their spouse, and allows employee deferrals, which are due by Dec. 31, and employer contributions, which are due by the tax deadline.

“The key piece is making sure that the paperwork or documents are established by the end of the year,” Guarino said. If you’re confused about setting up the plan or how to calculate the employer contribution, it may be smart to speak with a tax professional, he said.

Of course, if you haven’t maxed out your workplace 401(k), it’s possible there’s still time to boost contributions for your last one or two paychecks for 2022, but “time is of the essence,” Guarino said.

Plus, you have until the tax deadline for pretax individual retirement account contributions, which may also qualify for a deduction.

Keep personal and business transactions separate

When starting a business, tax professionals say to avoid “commingling” personal and business income and expenses by keeping them separate — and 1099-K earnings are no exception.

Campo suggests opening another bank account and credit card and using separate third-party payment network accounts for business transactions “to make your life a lot easier.”

Here’s why: If you receive a 1099-K for $10,000, and only $5,000 applies to your business, you’ll need to show the other $5,000 was for personal transfers through recordkeeping, he said.

“It creates more onus on the taxpayer,” Campo said, noting that it’s better to keep personal and business accounts separate because “it’s really cut and dried.”

It’s critical to save receipts for any business expenses you plan to deduct on Schedule C. In the case of an audit, the IRS won’t accept credit card statements as support, Campo warned. The agency wants to see copies of your receipts covering each business expense.

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3 Things To Know About Michigan Estate Tax

On December 6, 2022 / Michigan Taxes

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Is There a Michigan Estate Tax?

There is no estate tax in Michigan. Michigan is one of 38 states that have no estate tax. No matter the size of your estate, you won’t owe money to the Wolverine State. You might owe taxes to the federal government through the federal estate tax, depending on the size of your estate.

Even though there is no Michigan estate tax, you might still owe the federal estate tax. The exemption for that tax is $11.70 million in 2021 and $12.06 million in 2022. This tax is portable for married couples, meaning that with the right legal moves a married couple can protect up to $24.12 million when both spouses have died.

What Is The Estate Tax?

The estate tax is applied to the estate of a recently deceased person after they die but before the money is passed on to their heirs. It is sometimes referred to as the “death tax.”

The estate tax is not to be confused with the inheritance tax. That tax is applied to a person’s heirs after they have already received their inheritance.

Does Michigan Have an Inheritance Tax and Gift Tax?

Like the majority of states, Michigan does not have an inheritance tax. If you stand to inherit money in Michigan, you should still make sure to check the laws in the state where the person you are inheriting from lives. In Pennsylvania, for example, the inheritance tax can apply to heirs who live out of state if the descendant lives in the state.

Michigan also has no gift tax. The federal gift tax exemption is $15,000 per recipient per year in 2021 and $16,000 in 2022

TIPS:

Estate planning, in Michigan or elsewhere, takes time and knowledge. If you need some help, you should consider reaching out to ATS Advisors. We are professionals in this matter and are here to help!

Tax Brackets 2023

On December 2, 2022 / IRS

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Michigan Tax Brackets 2023 –

The IRS announced its annual adjustments to the standard deduction and tax brackets for the 2023 tax year. They are a considerable increase over 2022. This is a response to ongoing inflation, which has the effect of eroding spending power even as it increases some workers’ take home pay.

As with all things taxes, this can raise some questions. Below, we’ll provide answers.

For more info on how these changes will affect your personal tax bill, consider reaching out to ATS Advisors Today!

What Is The New Standard Deduction For 2023?

The new standard deductions for personal income taxes apply as follows:

Individuals: $13,850 in 2023, a $900 increase
Head of Household: $20,800, a $1,400 increase
Married Filing Jointly: $27,700, an $1,800 increase

What Are The New Tax Brackets For 2023?

The new tax brackets for personal income taxes apply as follows:

10%: All income below $11,000 Individual / $22,000 Married
12%: $11,000 Individual / $22,000 Married, an increase of $725/$1,450
22%: $44,725 Individual / $89,450 Married, an increase of $2,950/$5,900
24%: $95,375 Individual / $190,750 Married, an increase of $6,300/$12,600
32%: $182,100 Individual / $364,200 Married, an increase of $12,050/$24,100
35%: $231,250 Individual / $462,500 Married, an increase of $15,300/$30,600
37%: All income above $578,125 Individual / $693,750 Married, an increase of $38,225/$45,900

Capital gains taxes have also been adjusted. The 2023 capital gains brackets are:

0%: All earnings below $44,625 Individual/$89,250 Married
15%: $44,625 Individual/$89,250 Married, an increase of $2,950/$5,900
20%: $492,300 Individual/$553,850 Married, an increase of $32,550/$36,650

Does The IRS Ordinarily Do This?

Yes.

The IRS automatically adjusts income tax brackets and the standard deduction every year in response to annual inflation. If it didn’t, Americans would pay 30% on every dollar over $6,000. Adjusted for inflation, this would come to a 30% tax bracket on all income over $75,800, indicating how little Americans pay in taxes compared with past decades.

What is noteworthy in 2023 is the scale of these adjustments. Since the 1980’s, U.S. inflation has stayed around the Federal Reserve’s target 2% rate, fluctuating between 0% and 4% most years. This has led to relatively minor annual tax adjustments.

The high inflation of 2022 caused outsized results in this otherwise routine practice, with most adjustments between 6.5% and 8%. For example, between 2021 and 2022 the IRS adjusted the 12% individual bracket by $325, an increase of roughly 3.2%. For tax year 2023 the IRS adjusted that same 12% bracket by $725, an increase of 6.5%.

What Is The Impact of the New Brackets?

Any upward adjustment to the standard deduction or tax brackets is an effective income tax cut. It means that taxes apply to less of your income and that you pay less on the income that is taxed.

The question is whether any given taxpayer ends up with more spending power. The IRS doesn’t adjust its rates to give people tax relief, but rather to reflect the new value of money based on inflation/deflation cycles. If prices have gone up by 10%, but you keep 7% more from your taxes, then as a consumer you’re still effectively a little bit less wealthy than when you started.

What makes this more confusing is the degree to which sector-specific and region-specific inflation have muddled the economic picture as, contrary to general reporting, prices have stabilized in many areas but are skyrocketing in a few others. The result is that some taxpayers will, in fact, end up wealthier from these rate changes based on their spending patterns.

For example, if you already own your own home you’re largely insulated from the housing costs that are driving a lot of current inflation. With gas prices back to normal, and inflation currently flat for food and consumer goods, you may end up wealthier from these bracket changes. By contrast, median rents have increased between 12.5% and 16% since 2021. If you rent an apartment, particularly in a city, these tax changes won’t even cover half of your cost of living increase.

Who Does This Tax Change Apply To?

This applies to all U.S. income tax payers. If you file and pay income taxes to the IRS in 2023, you will do so using the new brackets.

What Income Does This Affect?

The new tax brackets will apply to all earnings starting on January 1, 2023. It does not apply retroactively, meaning that you can’t apply the new standard deduction or tax rates to income on or before December 31, 2022.

Can I Apply This to Current Earnings?

As above, you cannot apply the new tax brackets to any income that you earn on or before December 31, 2022. In IRS-speak, this means that if you trigger a tax event in 2022 the current tax brackets apply, not the new ones.

But you might apply the new tax brackets if you can defer earnings until 2023. The key is in that term “tax event.” This is a technical term for the IRS which means any event that causes you to owe taxes on income, earnings or other wealth. It means different things under different circumstances, but for individuals a tax event usually occurs when you take possession of new wealth. For example, when you receive your paycheck this is considered a tax event. The same goes for when you collect the earnings on a stock sale or when you receive payment after billing a client.

Business Earnings – It’s important to note that businesses can us two different methods of bookkeeping. One considers it a tax event when you are owed money. The other considers it a tax event when you collect that money. Make sure you understand which method you use and apply it consistently.

The common theme is that, in most cases, you trigger a tax event when the new wealth is received, not when it’s owed. In other words, you pay 2022 tax rates on all money that you collected in 2022. You will pay 2023 tax rates on all money that you collect in 2023.

So, if you can defer income or earnings until 2023 you might be able to take advantage of the new rates. For example, some employers will allow you to defer your paycheck. Employees who do this can push their earnings to the new tax year. Self-employed individuals may be able to hold off on invoicing clients until January 1, 2023, collecting under the new brackets rather than the old. Selling investments assets is a little more complicated, since price changes may obviate any tax gains, but the same rules would apply to selling in 2022 vs. 2023.

It’s important to note that all of this is theoretical and absolutely should not be taken as individual tax planning advice. The rules for your personal situation may vary, as tax laws are highly situation-specific and can depend on your employer’s method of bookkeeping.

Do I Have To Do Anything?

No. While outsized, this is a standard change. It does not affect your rights or responsibilities differently than any other tax year. You will pay your taxes as normal, simply applying the new numbers as appropriate.

Bottom Line

The IRS has announced its new tax brackets for 2023, and they’re a considerable change over previous years.

SmartAsset – Eric Reed

Plymouth Township Summer Taxes & Winter Taxes

On November 22, 2022 / Michigan Taxes

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Plymouth Township Summer Taxes & Winter Taxes

Any Questions? Contact ATS Advisors Plymouth

Your summer tax bill includes the tax levies for:

City of Plymouth
Plymouth-Canton Schools
State Education Tax (SET)
Wayne County Regional Educational Service Agency(RESA)
Enhanced Wayne County Regional Educational Service Agency (ENH RESA)
Schoolcraft College
Wayne County Operating

Summer tax bills are due August 10 annually.

Summer Tax Bills are payable through August 10 without penalty. They may be paid at the City Hall counter, placed in the drop box next to the book return at the library, or deposited in the drop box in the City Hall lobby if the counter is closed.

Winter Taxes

Your winter tax bill includes the tax levies for:

Wayne County Voted Millage
Wayne County Jail
Wayne County Parks
Plymouth District Library
Huron Clinton Metro Authority
Detroit Regional Zoo
Detroit Institute of Arts Museum

Winter tax bills are due February 28 each year.

Winter Tax Bills are payable through February 28 without penalty. They may be paid at the City Hall counter, placed in the drop box next to the book return at the library, or deposited in the drop box in the City Hall lobby if the counter is closed. All tax payments placed in the drop boxes by December 31 will be receipted as paid in the current year.

Additional information is provided on the back of your bill. Please review your tax bill to check the correctness of the information appearing on it. If you receive a bill in error, please return the tax bill to the City Treasurer’s Office. If you are the owner or agent of the property but the name or address information is incorrect, please correct it on the bill and mail it back with your payment. If you need additional information, please call the City Treasurer’s Office at 734- 453-1234, during regular business hours.

Here are the current millage rates .

In addition to paying your tax bill in person on via mail, there are several other options.

Online Payments

You can pay your taxes online via a credit/debit card through the online property information site. There is a convenience fee associated with using this service.

Direct Payment
You may request that your payment be made automatically by completing Direct Payment Enrollment form.

Special Payment Deferments

The State of Michigan has a program that allows certain property owners to defer their tax payments. Information on this program is available on the state’s website. The Step Forward Michigan program also provides property tax assistance.

403(b) retirement plan changes

On November 15, 2022 / IRS

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IR-2022-196, November 7, 2022 – 403(b) retirement plan changes

WASHINGTON — The Treasury Department and Internal Revenue Service today announced the expansion of one of their programs for approving retirement plans. The IRS will now allow 403(b) retirement plans, which are used by certain public schools, churches and charities, to use the same individually designed retirement plan determination letter program currently used by qualified retirement plans.

Revenue Procedure 2022-40PDF details this expansion and includes other changes affecting individually designed retirement plans.

Highlights of these changes:

Revenue Procedure 2022-40 contains the following notable additions for 403(b) retirement plans:

Expansion for initial plan determination – Beginning June 1, 2023, 403(b) retirement plan sponsors may submit determination letter applications for all initial individually designed retirement plans based on the sponsor’s Employer Identification Numbers. (For further details, see section 12 of Revenue Procedure 2022-40PDF.)
Terminations – Beginning June 1, 2023, 403(b) retirement plan sponsors may also request a determination letter upon plan termination on a Form 5310, Application for Determination for Terminating Plan, or at any time thereafter without regard to their EIN.

Notable changes to procedures for submitting and processing individually designed retirement plans include:

Prior letter issued to a Pre-approved Plan adopter not treated as an initial plan determination – A determination letter issued to an adopter of a pre-approved retirement plan as a result of filing a Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans, is no longer considered in determining whether a plan sponsor is eligible to submit that plan for a determination letter for an initial plan determination on a Form 5300, Application for Determination for Employee Benefit Plan.
Scope of review – IRS generally will consider in its review qualification requirements and section 403(b) requirements that are in effect, or that have been included on a Required Amendments List, on or before the last day of the second calendar year preceding the year in which the determination letter application is submitted, subject to any specified modifications on the annual Employee Plans revenue procedure that provides the administrative and procedural rules for submitting determination letter applications, currently Revenue Procedure 2022-4.

These rules will apply to submissions of all individually designed retirement plans.

Revenue Procedure 2023-4, currently in development, will be released in the near future and will contain additional changes to procedural requirements for plan submissions, such as phasing-in mandatory e-submission of determination letter requests. Forms 5300 and 5310 will also be updated to reflect these changes.

Questions? Contact Us!

Tax Credits For Veterans & Other IRS News

On November 9, 2022 / IRS

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Tax Credits For Veterans & Other IRS News

TAX PLANNING ALL YEAR

Stay on top of your taxes all year long with Publication 3, Armed Forces’ Tax Guide
Publication 3, Armed Forces’ Tax Guide, covers the special tax situations of active members of the U.S. Armed Forces.
YouTube Video (less than 2 minutes): https://youtu.be/SRYppoVk9zM

HAVE YOU SEEN THIS?

The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers of all sizes for hiring and employing a qualified veteran who have faced significant barriers to employment. This includes both taxable and certain tax-exempt employers located in the United States and in certain U.S. territories. While taxable employers claim the WOTC against income taxes, eligible tax-exempt employers can claim the WOTC only against payroll taxes.
Up to $24,000 in wages may be taken into account in determining the WOTC for certain qualified veterans.
A “qualified veteran” is a veteran who is any of the following:
- A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date
- Unemployed for periods of time totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date
- Unemployed for periods of time totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date
- Entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces or
- Entitled to compensation for a service-connected disability and unemployed for periods of time totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date
See our September Tax Tip for information when hiring veterans: Help wanted? Businesses that are hiring should know about the work opportunity tax credit

DID YOU KNOW?

The Internal Revenue Service have a military page on IRS.gov? Connect here: Military | Internal Revenue Service (irs.gov)
IRS Free File remains open until November 17th for those, including the military, who still need to file their 2021 tax returns. This includes those who qualify for the Child Tax Credit, Recovery Rebate Credit or Earned Income Tax Credit but haven’t yet filed a 2021 tax return to claim them.
Use Free File: Do your Federal Taxes for Free | Internal Revenue Service (irs.gov)

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