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Michigan Personal Property Tax Exemption 2023

On July 28, 2023 / Uncategorized

Personal Property Exemption CHANGES FOR 2023 – You may NOW qualify! Taxpayers with less than $80,000 of Personal Property are no longer required to annually file Form 5076 in order to claim the exemption.

Michigan Resident? Questions? Contact ATS

If a taxpayer did not file for the exemption in 2022, it can be claimed for 2023 by filing Form 5076 by February 21st, 2023. Once granted, the exemption will continue until the taxpayer no longer qualifies. At that point, the taxpayer is required to file Rescission Form 5618 and a personal property statement no later than February 20th of the year that the property is no longer eligible. Failure to file a Rescission Form will result in significant penalty and interest as prescribed by PA 132 of 2018. To be eligible, a taxpayer must meet ALL of the following: 1. The exemption must be properly claimed (this is done by filing the affidavit by February 21st, 2023); and 2. The personal property must be classified as industrial personal property or commercial personal property as defined in MCL 211.34c or would be classified as industrial personal property or commercial personal property if not exempt; and 3. The combined true cash value of all industrial personal property and commercial personal property owned by, leased by or in the possession of the owner or a related entity claiming this exemption is less than $80,000 in the local tax collecting unit; and 4. The property is not leased to or used by a person that previously owned the property or a person that, directly or indirectly controls, is controlled by, or under common control with the person that previously owned the property. NOTE: Analysis is necessary beyond just doubling last year’s assessment. If you feel you qualify for this exemption, you must complete, in its entirety, and return to the Assessor by February 21st, 2023, the “Small Business Property Tax Exemption Claim Under MCL 211.9o,” Michigan Dept of Treasury Form 5076, included with this notice. To claim this exemption, the completed form must be postmarked no later than February 21st, 2023. Your exemption may: 1) be denied by the local assessor if it is determined you do not qualify for this exemption; or 2) not be accepted by the local assessor if the Affidavit is not completely filled out or is received with a postmark after February 21st, 2023. Late forms MUST be filed with a completed petition form L-4035 directly with the 2023 March Board of Review prior to the closure of the March Board.

** NEW for 2023 – Specifically for taxpayers with $80,000 – $180,000 of personal property To be eligible, a taxpayer must meet ALL of the above requirements EXCEPT #3, which is replaced by the following:

3. The combined true cash value of all industrial personal property and commercial personal property owned by, leased by or in the possession of the owner or a related entity claiming this exemption is greater than or equal to $80,000 but less than $180,000 in the local tax collecting unit; and (continue with #4 above) If you feel you qualify for this exemption, you must complete, in its entirety, and return to the Assessor by February 21st, 2023, the “Small Business Property Tax Exemption Claim Under MCL 211.9o,” Michigan Dept of Treasury Form 5076 ALONG WITH Form 632 “Personal Property Statement” each year by February 20th (as long as it is not a Saturday or Sunday), both forms are included with this notice.

To claim this exemption, the completed forms must be postmarked no later than February 21st, 2023. Your exemption may: 1) be denied by the local assessor if it is determined you do not qualify for this exemption; or 2) not be accepted by the local assessor if the Affidavit is not completely filled out or is received with a postmark after February 21st, 2023. Late forms MUST be filed with a completed petition (form L-4035, www.michigan.gov/taxes/property/forms/instructions/board-of-review) directly with the 2023 March Board of Review prior to the closure of the March Board. ** NEW FOR 2023 – Qualified Heavy Equipment Rental Personal Property Exemption If the business is a Qualified Renter, with a NAICS code of 532412 or 532310, maintains a qualified renter business location within Michigan and receives more than 50% of the business’ annual gross receipts from the rental of QHERPP to the public, you must file Form 5819, the “Qualified Heavy Equipment Rental Personal Property Exemption Claim” and a statement approved by the State Tax Commission (form can be found at: www.michigan.gov/taxes) of all QHERPP located at and/or rented from the qualified renter business location. The form and statement are to be filed with the assessor of the local unit where the qualified renter business is located, NOT where the equipment is while it is rented. The qualified renter should identify ALL QHERPP located at or rented from its qualified renter business location in a local assessing unit, not just some of the QHERPP at that location. Form 5819 and statement must be filed annually and must be postmarked no later than February 20th, 2023. Your exemption may: 1) be denied by the local assessor if it is determined you do not qualify for this exemption; or 2) not be accepted by the local assessor if the Affidavit is not completely filled out or is received with a postmark after February 20th, 2023. Late forms MUST be filed with a completed petition (form L-4035, www.michigan.gov/taxes/property/forms/instructions/board-of-review) directly with the 2023 March Board of Review prior to the closure of the March Board. QHERPP is exempt from ad valorem property taxes ONLY IF it is located in Michigan on tax day (December 31) and one of the following is satisfied: 1. It is permanently labeled with the name of the qualified renter and the qualified rental business location. 2. It is permanently labeled with the name and phone number of the qualified renter, and the qualified renter’s annual claim of exemption identifies the physical location of the QHERPP on tax day. All QHERPP that has claimed an exemption is not eligible to be exempt under MCL 211.9m (Qualified New Personal Property), 9n (Qualified Previously Existing Personal Property) or 9o (Eligible Personal Property). Statements filed in 2023 must include the amount of ad valorem property taxes levied in 2020, 2021 and 2022 on QHERPP owned by the qualified renter. The statement must also include the qualified renter’s liability under the specific tax for 2020, 2021 and 2022 if the specific tax had been in effect for those years for either of the following situations: 1. QHERPP that had ad valorem property taxes paid in 2020, 2021 or 2022 2. QHERPP that was acquired or brought into Michigan during 2020, 2021 or 2022 by a qualified renter and rented from a qualified business location The qualified renter must provide documentation of these amounts as required by the Department of Treasury. The information provided is subject to audit by the Department of Treasury. IMPORTANT – The taxpayer must keep adequate books and records relating to: The description – Date of purchase, lease or acquisition – The purchase price, lease amount, or value of all industrial personal property and commercial personal property owned by, leased by or in the possession of that person or a related entity – Records must be kept for 4 years. These records are subject to audit. Further information regarding these exemptions can be found on the State’s website: www.michigan.gov/taxes, click on Go to Property Taxes, then Personal Property Tax General Information.

Michigan Tax Overages

On May 23, 2023 / Uncategorized

Have a question about Michigan Tax Overages? Contact your trusted Michigan CPA, ATS Advisors.

What are Tax Overages?

Tax “Overages” refers to the extra money that is left over when a foreclosed property is sold at a tax sale auction for more than the amount of back taxes owed on the property. Unlike mortgage auctions, the opening bid at a tax auction is usually the amount of unpaid taxes due on the property. (plus penalties, interest, and any associated costs for putting on the auction). If a property sells for more than the opening bid, then overages (surplus funds) will be generated. However, what most homeowners do not know is that many states do not allow counties to keep this extra money for themselves. Some state statutes dictate that excess funds can be claimed by a few parties – including the person who owed taxes on the property at the time of the sale.

Michigan Tax Overages?

On July 17, 2020, the Michigan Supreme Court issued an unanimous[1] decision, finding that the retention of surplus proceeds from a tax-foreclosure sale under the General Property Tax Act (“GPTA”) is an unconstitutional taking without just compensation under Article 10, § 2 of Michigan’s Constitution of 1963. Before the decision by the Court, Michigan was among a minority of states who permitted the retention of surplus proceeds from tax-foreclosure sales. Property owners that have lost their property as a result of a tax foreclosure sale now have a claim against the county for the difference between the amount of taxes owed and the amount realized at the tax sale by the County.

Whats Next?

Michigan.gov states: Beginning with the 2021 foreclosure auctions, those who hold interest in property at the time of foreclosure, may file to claim leftover proceeds for parcels which sell for more than the owing delinquency. Further details are available on Michigans Auctions and Claimants webpage.

Michigan Small Business Alternative Credit

On May 8, 2023 / Uncategorized

How is the Michigan Small Business Alternative Credit under MCL 206.671 calculated by a taxpayer that is a unitary business group? How do the disqualifiers and percentage reducers work?

Michigan Resident and Need Help? Contact ATS Advisors!

The Michigan Small Business Alternative Credit is available to any taxpayer (other than insurance companies under Chapter 12 and financial institutions under Chapter 13) with gross receipts that do not exceed $20,000,000.00 and with adjusted business income minus the loss adjustment that does not exceed $1,300,000.00 as adjusted annually for inflation using the Detroit consumer price index and subject to certain additional disqualifiers. MCL 206.671(1). The taxpayer will also be disqualified if an officer or shareholder receives more than $180,000.00 in compensation or compensation plus share of business income exceeds that amount (allocated income disqualifier). MCL 206.671(1)(a).

“Taxpayer” is defined to include a unitary business group. MCL 206.611(5). The gross receipts and adjusted business income thresholds are those of the unitary business group (UBG) and are calculated at the group level. The allocated income disqualifier is calculated for an officer or shareholder using all amounts paid or allocable to the officer or shareholder by all entity members of the unitary business group. MCL 206.671(2)(B). The reduction percentages of the credit, which may reduce but not completely disqualify a taxpayer from the credit, are calculated in the same manner.

A disqualifier or reduction percentage applies to the entire UBG if such applies to any one member of the group. MCL 206.671(9). This credit is calculated without regard to intercompany eliminations.

Example X, a taxpayer that is a unitary business group is disqualified from taking the credit if that unitary business group includes a member that is an LLC taxed as a corporation and any one shareholder or any one member of the LLC receives more than $180,000.00 in shareholder compensation. The shareholder’s compensation is calculated by combining all compensation paid to the shareholder by all members of the UBG.

Example Y, the credit is reduced by 20% if the taxpayer is a unitary business group that includes a member that is a corporation and the compensation and director’s fees of an officer of that member corporation exceed $160,000.00 but are less than $165,000.00, calculated with compensation and director’s fees paid by all members of the group.

Michigan Small Business Alternative Credit – michigan.gov

Michigan Solar Tax Credit 2022

On May 1, 2023 / Uncategorized

Live in Michigan? Have any Solar Tax Questions? Contact ATS Advisors today

Michigan is a state where having alternative energy sources could save you a great deal of money. With warm summers and cold winters, ensuring you have a solar panel system could help to save thousands of dollars a year. The key is finding a system that you can afford and will continue to lower your electricity rate through the years. In our guide providing the best Michigan solar incentives, we provide:

Why solar installations make sense
Rebates to help you save money on your solar energy system
Tax incentives that can help make a solar system possible

Although this is true, the question still remains: Is there a Michigan Solar Tax Credit 2022 ?

Michigan has no state-specific tax rebate program, there are local incentives for solar projects and the federal programs that help to keep down the cost of solar panels.

The Best Solar Incentives, Tax Credits, and Rebates in Michigan

The best solar incentive in Michigan is the Federal Solar Investment Tax Credit (ITC). This program is a great way to help homeowners keep energy costs down and get a sizable tax return the year they put their system in place.

Incentive	Summary	End Date
Federal Solar Tax Credit (ITC)	Michigan residents can take advantage of the Federal Solar Tax Credit and get a discount of 30% applied to their tax returns. If you purchase $20,000 worth of solar panels, you can get a credit of $6,000 on your next tax return. Remember, this does require you to come out of pocket first. Read More	December 31st, 2032
Net Metering	Net metering allows homeowners that create excess energy to use it as a credit on their next electric bill. Although net metering is not mandatory in Michigan, many providers take advantage of it and offer fair rates.	None
Commercial Loan Programs	For government and commercial solar installations in Michigan, there are various programs to help improve overall rates and availability of funds. Some of these can help with loans up to $100,000.	None
Residential Loan Programs	The Michigan Saves loan program will help homeowners secure financing ranging from $1,000 to $50,000 for their home energy upgrades and installations. The term of this financing can extend as long as ten years.	None
Michigan Residential Property Tax Exemption	Property taxes go up when a solar system is installed. With the Michigan Residential Property Tax Exemption, the costs are kept down, and you can upgrade your home without the financial burden of taxes increasing. Read More	None

Federal Solar Investment Tax Credit (ITC)

The Federal Solar Investment Tax credit is available in all 50 states, Michigan included. This program will give you a discount on your next federal tax return based on your home solar installation cost. This program was recently extended through the end of 2032 as a part of the Inflation Reduction Act.

The ITC allows you a tax credit of 30% of the cost of your solar installation. The solar system will need to be paid out of pocket and in full, with credit being returned and filed against any taxes you owe for that year. If you do not owe taxes the year that you installed your solar energy system, you can simply have this credit follow you until you need it.

Michigan Solar Energy Tax Credit

Michigan does not have a solar energy tax credit or rebate. Some states have an additional savings program that can be very beneficial and help to save additional money, but Michigan only allows for federal savings in this category. As we have mentioned, these programs can be adopted at any time, so it’s worth checking how they change through the years.

Michigan Solar Sales Tax Exemption

There is no tax credit for a residential solar system purchase in Michigan. You will still be subject to the 6% sales tax for your new solar power system purchases.

Michigan Solar Property Tax Exemption

Property taxes will increase with the installation of a solar system in Michigan. Luckily, a program will make your property taxes stay the same even after your solar installation. The solar property tax exemption ensures that even with this $20,000 or more upgrade to your home, your assessed value does not change, and taxes should remain level.

Michigan Net Metering

Michigan net metering creates more energy than your home needs and supplies some of that energy back to the utility company or reserves it when you need it the most. Most homeowners find that their solar system does not create enough energy on cloudy days or at night. Therefore you can bank some energy with the local utility company and have it offset your total costs.

The net metering program in Michigan is pretty good. The state does not mandate a certain amount of payment per kilowatt hour, and they don’t even require companies to offer net metering. However, some good programs with companies like DTE energy and others will help lower your total electric cost obligation at the end of every month.

Michigan Saves – Home Energy Loan Program

The Michigan Saves Home Energy Loan Program will help homeowners secure financing for energy improvements to their homes. The size of the loans this program offers range from $1,000 to $50,000, and they have low rates to help save money on interest.

Loan terms on these loans can be as long as ten years.

Lansing Board of Water & Light – Residential Energy Efficiency Rebates

In the city of Lansing, there are additional rebates for homeowners that make their homes more energy efficient. These rebates will vary depending on the type of system you are installing and the size.

The rebate is currently $500 per kW with a max of 4kW. Adding this in addition to the federal tax rebate and a Michigan Saves Home Energy Loan Program, can result in quite a bit of saving.

Commercial Michigan Solar Incentives

The commercial Michigan solar incentives are strong and will allow for a few extra benefits and loan programs that the residential programs do not offer. If a solar panel system could help your company or business with its green initiatives, Michigan is an excellent place to be.

Solar Incentives for Nonprofits and Businesses in Michigan

There are no specific solar incentives for nonprofit organizations in the state of Michigan. However, there are tax relief programs for nonprofits and loan funding programs that will apply to nonprofits and businesses.

USDA REAP Grant

The United States Department of Agriculture offers a REAP grant or Rural Energy for America program. This is in place to help agricultural producers secure renewable energy resources loans. The USDA will help ensure loan financing and grant funding for agricultural producers, making the process straightforward. Simply input your information, and they will be in touch about ways that you can save. Make sure you connect with the USDA at the beginning of your search for solar power, as they can offer tremendous guidance.

Federal Solar Tax Credit for Businesses in Michigan

For a federal corporate income tax return, there is a 30% credit against the cost of any system that was placed into the building during that year. This credit is the best option when looking for large bulk savings in the state of Michigan. Most businesses have a tax burden at the end of the year, and this can help offset that considerably.

The Federal Solar Tax Credit is still one of the best ways to save money on solar energy, and is in place through the end of 2032.

Michigan Commercial Net Metering

Net metering is also available at the commercial level for Michigan businesses and property owners. Net metering for commercial and governmental institutions not only helps with energy efficiency but can also make the building more sustainable and profitable long term.

The state of Michigan does not mandate commercial net metering. However, in the commercial and business sector, there are plenty of programs in place from large energy providers that want to ensure that this solar-created electricity is used properly to power as much of the grid as possible. The solar arrays put in place by commercial and business operations can create large amounts of energy.

Refundable Payroll Tax Credit

The refundable payroll tax credit is for businesses that meet specific requirements for alternative energy. Payroll taxes can be considerably reduced for businesses that take these green energy initiatives, saving thousands of dollars annually.

With this refundable payroll tax credit, you will multiply the payroll amount attributable to qualified employees by the income tax rate for that year. A qualified accountant can help with these programs, but it takes time and attention to detail to set this up.

City of Ann Arbor – Green Power Purchasing

The City of Ann Arbor Green Power Purchasing is designed to help local governments with their out-of-pocket expenses on solar initiatives. This program aims to reduce greenhouse gasses and increase the amount of solar and wind power in the city yearly.

To encourage this, the City of Ann Arbor has incentives and programs that help make this more appealing to businesses and government institutions. The four goals of this program include supporting onsite renewables and battery storage, developing more community solar programs, and launching solar landfill projects.

Michigan Saves – Commercial Energy Loan Program

The Michigan Saves Commercial Energy Loan Program can make it easier to afford a solar panel system for a business or commercial property. It’s smart to compare these loans from the PACE program and other sources to determine the best rate and the best term.

The Michigan Saves program offers considerably higher amounts of funding for businesses than they do for residential installations.

Michigan Local PACE Program

The PACE program allows property owners in the commercial or industrial sector to get financing for energy-efficient improvements to their property. The PACE program requires a $10,000 initial investment into energy-saving improvements.

PACE financing must be in place before starting your commercial solar project to ensure you get the best possible financing.

Why Go Solar in Michigan?

Michigan currently ranks 24th in the nation according to SEIA for being solar-friendly. The cost of installing solar options in Michigan has dropped through the years. Local governments have adopted home energy-saving programs to make it more affordable for homeowners that want to become greener. However, there is still no state savings program, which puts Michigan slightly behind.

A PV or Photovoltaic system will help make you less reliant on Michigan power providers and more self-sufficient. Most home solar systems do not produce enough electricity to power your home and electric vehicle completely, so some programs allow you to continue to move away from the grid and have a more evenly distributed generation of electricity in your home.

As great as it is to be dealing with creating your electricity and saving money, many Michigan homeowners want the system to help with environmental issues. Using a natural resource like wind, sun, or water to generate electricity will help the environment.

Sold on Solar for your home? Get a free quote from local solar installers.

Michigan Solar Tax Credit 2022 – Todays Homeowner.com

Does Form 709 Need To Be Filed With 1040?

On April 26, 2023 / Uncategorized

If you are wondering: “Does Form 709 Need To Be Filed With 1040?” Then this article is for you!

As always, If you are confused, give ATS Advisors a call and we will be happy to assist you!

The annual gift exclusion for 2022 is $16,000. See Annual Exclusion, later.
For gifts made to spouses who are not U.S. citizens, the annual exclusion has increased to $164,000. See Nonresidents Not Citizens of the United States, later.
The top rate for gifts and generation-
skipping transfers remains at 40%. See Table for Computing Gift Tax.
The basic credit amount for 2022 is $4,769,800. See Table of Basic Exclusion and Credit Amounts.
The applicable exclusion amount consists of the basic exclusion amount ($12,060,000 in 2022) and, in the case of a surviving spouse, any unused exclusion amount of the last deceased spouse (who died after December 31, 2010). The executor of the predeceased spouse’s estate must have elected on a timely and complete Form 706 to allow the donor to use the predeceased spouse’s unused exclusion amount.

Purpose of Form

Use Form 709 to report the following.

Transfers subject to the federal gift and certain generation-skipping transfer (GST) taxes and to figure the tax due, if any, on those transfers.
Allocation of the lifetime GST exemption to property transferred during the transferor’s lifetime. (For more details, see Schedule D, Part 2—GST Exemption Reconciliation , later, and Regulations section 26.2632-1.)

All gift and GST taxes must be figured and filed on a calendar year basis. List all reportable gifts made during the calendar year on one Form 709. This means you must file a separate return for each calendar year a reportable gift is given (for example, a gift given in 2022 must be reported on a 2022 Form 709). Do not file more than one Form 709 for any 1 calendar year.

How To Complete Form 709

Determine whether you are required to file Form 709.
Determine what gifts you must report.
Decide whether you and your spouse, if any, will elect to split gifts for the year.
Complete lines 1 through 19 of Part 1—General Information.
List each gift on Part 1, 2, or 3 of Schedule A, as appropriate.
Complete Schedules B, C, and D, as applicable.
If the gift was listed on Part 2 or 3 of Schedule A, complete the necessary portions of Schedule D.
Complete Schedule A, Part 4.
Complete Part 2—Tax Computation.
Sign and date the return.

Make sure to complete page 1 and the applicable schedules in their entirety. Returns filed without entries in each field will not be processed.

Remember, if you are splitting gifts, your spouse must sign line 18 in Part 1—General Information.

Who Must File

In general. If you are a citizen or resident of the United States, you must file a gift tax return (whether or not any tax is ultimately due) in the following situations.

If you gave gifts to someone in 2022 totaling more than $16,000 (other than to your spouse), you probably must file Form 709. But see Transfers Not Subject to the Gift Tax and Gifts to Your Spouse, later, for more information on specific gifts that are not taxable.
Certain gifts, called future interests, are not subject to the $16,000 annual exclusion and you must file Form 709 even if the gift was under $16,000. See Annual Exclusion, later.
Spouses may not file a joint gift tax return. Each individual is responsible to file a Form 709.
You must file a gift tax return to split gifts with your spouse (regardless of their amount) as described in Part 1—General Information, later.
If a gift is of community property, it is considered made one-half by each spouse. For example, a gift of $100,000 of community property is considered a gift of $50,000 made by each spouse, and each spouse must file a gift tax return.
Likewise, each spouse must file a gift tax return if they have made a gift of property held by them as joint tenants or tenants by the entirety.
Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individual beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes.
The donor is responsible for paying the gift tax. However, if the donor does not pay the tax, the person receiving the gift may have to pay the tax.
If a donor dies before filing a return, the donor’s executor must file the return.

Does Form 709 Need To Be Filed With 1040?

If you meet all of the following requirements, you are not required to file Form 709.

You made no gifts during the year to your spouse.
You did not give more than $16,000 to any one donee.
All the gifts you made were of present interests.

Gifts to charities.

If the only gifts you made during the year are deductible as gifts to charities, you do not need to file a return as long as you transferred your entire interest in the property to qualifying charities. If you transferred only a partial interest, or transferred part of your interest to someone other than a charity, you must still file a return and report all of your gifts to charities.

Note.

See Pub. 526, Charitable Contributions, for more information on identifying a qualified charity.

If you are required to file a return to report noncharitable gifts and you made gifts to charities, you must include all of your gifts to charities on the return.

Transfers Subject to the Gift Tax

Generally, the federal gift tax applies to any transfer by gift of real or personal property, whether tangible or intangible, that you made directly or indirectly, in trust, or by any other means.

The gift tax applies not only to the free transfer of any kind of property, but also to sales or exchanges, not made in the ordinary course of business, where value of the money (or property) received is less than the value of what is sold or exchanged. The gift tax is in addition to any other tax, such as federal income tax, paid or due on the transfer.

The exercise or release of a general power of appointment may be a gift by the individual possessing the power. General powers of appointment are those in which the holders of the power can appoint the property under the power to themselves, their creditors, their estates, or the creditors of their estates. To qualify as a power of appointment, it must be created by someone other than the holder of the power.

The gift tax may also apply to forgiving a debt, to making an interest-free or below-market interest rate loan, to transferring the benefits of an insurance policy, to certain property settlements in divorce cases, and to giving up some amount of annuity in exchange for the creation of a survivor annuity.

The gift tax applies to any digital asset. Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal transfer tax purposes.

Bonds that are exempt from federal income taxes are not exempt from federal gift taxes.

Sections 2701 and 2702 provide rules for determining whether certain transfers to a family member of interests in corporations, partnerships, and trusts are gifts. The rules of section 2704 determine whether the lapse of any voting or liquidation right is a gift.

Gifts to your spouse.

You must file a gift tax return if you made any gift to your spouse of a terminable interest that does not meet the exception described in Life estate with power of appointment, later, or if your spouse is not a U.S. citizen and the total gifts you made to your spouse during the year exceed $164,000.

You must also file a gift tax return to make the qualified terminable interest property (QTIP) election described under Line 12. Election Out of QTIP Treatment of Annuities, later.

Except as described earlier, you do not have to file a gift tax return to report gifts to your spouse regardless of the amount of these gifts and regardless of whether the gifts are present or future interests.

Transfers Not Subject to the Gift Tax

Four types of transfers are not subject to the gift tax. These are:

Transfers to political organizations,
Transfers to certain exempt organizations,
Payments that qualify for the educational exclusion, and
Payments that qualify for the medical exclusion.

These transfers are not “gifts” as that term is used on Form 709 and its instructions. You need not file a Form 709 to report these transfers and should not list them on Schedule A of Form 709 if you do file Form 709.

Political organizations.

The gift tax does not apply to a transfer to a political organization (defined in section 527(e)(1)) for the use of the organization.

Certain exempt organizations.

The gift tax does not apply to a transfer to any civic league or other organization described in section 501(c)(4); any labor, agricultural, or horticultural organization described in section 501(c)(5); or any business league or other organization described in section 501(c)(6) for the use of such organization, provided that such organization is exempt from tax under section 501(a).

Educational exclusion.

The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual. A qualifying educational organization is one that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. See section 170(b)(1)(A)(ii) and its regulations.

The payment must be made directly to the qualifying educational organization and it must be for tuition. No educational exclusion is allowed for amounts paid for books, supplies, room and board, or other similar expenses that are not direct tuition costs. To the extent that the payment to the educational organization was for something other than tuition, it is a gift to the individual for whose benefit it was made, and may be offset by the annual exclusion if it is otherwise available.

Contributions to a qualified tuition program (QTP) on behalf of a designated beneficiary do not qualify for the educational exclusion. See Line B. Qualified Tuition Programs (529 Plans or Programs) in the instructions for Schedule A, later.

Medical exclusion.

The gift tax does not apply to an amount you paid on behalf of an individual to a person or institution that provided medical care for the individual. The payment must be to the care provider. The medical care must meet the requirements of section 213(d) (definition of medical care for income tax deduction purposes). Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual.

The medical exclusion does not apply to amounts paid for medical care that are reimbursed by the donee’s insurance. If payment for a medical expense is reimbursed by the donee’s insurance company, your payment for that expense, to the extent of the reimbursed amount, is not eligible for the medical exclusion and you are considered to have made a gift to the donee of the reimbursed amount.

To the extent that the payment was for something other than medical care, it is a gift to the individual on whose behalf the payment was made and may be offset by the annual exclusion if it is otherwise available.

The medical and educational exclusions are allowed without regard to the relationship between you and the donee. For examples illustrating these exclusions, see Regulations section 25.2503-6(c).

Qualified disclaimers.

A donee’s refusal to accept a gift is called a disclaimer. If a person makes a qualified disclaimer of any interest in property, the property will be treated as if it had never been transferred to that person. Accordingly, the disclaimant is not regarded as making a gift to the person who receives the property because of the qualified disclaimer.

Requirements.

To be a qualified disclaimer, a refusal to accept an interest in property must meet the following conditions.

The refusal must be in writing.
The refusal must be received by the donor, the legal representative of the donor, the holder of the legal title to the property disclaimed, or the person in possession of the property within 9 months after the later of:
1. The day the transfer creating the interest is made, or
2. The day the disclaimant reaches age 21.
The disclaimant must not have accepted the interest or any of its benefits.
As a result of the refusal, the interest must pass without any direction from the disclaimant to either:
1. The spouse of the decedent, or
2. A person other than the disclaimant.
The refusal must be irrevocable and unqualified.

The 9-month period for making the disclaimer is generally determined separately for each taxable transfer. For gifts, the period begins on the date the transfer is a completed transfer for gift tax purposes.

Annual Exclusion

The first $16,000 of gifts of present interest to each donee during the calendar year is subtracted from total gifts in figuring the amount of taxable gifts. For a gift in trust, each beneficiary of the trust is treated as a separate donee for purposes of the annual exclusion.

All of the gifts made during the calendar year to a donee are fully excluded under the annual exclusion if they are all gifts of present interest and they total $16,000 or less.

Does Form 709 Need To Be Filed With 1040? – IRS 2023

6 Changes to Michigan Taxes for 2022

On March 13, 2023 / Uncategorized

Here are 6 Changes to Michigan Taxes for 2022 according to Michigan.gov/taxes

Exemption allowances and the tax rate:
- $5,000 for personal and dependent exemptions
- $2,900 for special exemptions
- $400 for qualified disabled veterans
- $5,000 for number of certificates of stillbirth from MDHHS
- 4.25% tax rate
Flow-through Entity Tax Credit
A member of a flow-through entity that elected to pay the Michigan flow-through entity tax may claim a refundable credit, and will report an addition on Schedule 1. Tax year 2022 MI-1040 or MI-1041 returns claiming this credit are eligible for e-file. For additional information, see the instructions for MI-1040, line 29 and Schedule 1, line 2, or the instructions for Form MI-1041.
Schedule 1 Additions and Subtractions:
- Line 25: Tier 3 Michigan Standard Deduction. Taxpayers who were born during the period January 1, 1953 through January 1, 1956, and reached the age of 67 on or before December 31, 2022, may be eligible for a Tier 3 Michigan Standard Deduction. This deduction is up to $20,000 for a return filed as single or married filing separately, or up to $40,000 for a married filing jointly return. Exemption(s) claimed on MI-1040, lines 9a and 9d, taxable Social Security benefits, military compensation (including retirement benefits), Michigan National Guard retirement benefits and railroad retirement benefits included in AGI may reduce the amount eligible to be claimed on this line. To determine your deduction, complete Worksheet 2.
  Note: Filers who qualify for the Michigan Standard Deduction should not file Form 4884.
- Line 27 – Senior citizens born prior to 1946 (or the unremarried surviving spouse of a decedent born prior to 1946 who also died after reaching age 65) may subtract interest, dividends, and capital gains included in AGI. This subtraction is limited to a maximum of $12,697 on a single return or $25,394 on a joint return, less any deduction for retirement benefits. (See page 16 in the MI-1040 Instruction Booklet)
  Dividend/Interest/Capital Gains Deduction Estimator
Pension Schedule (Form 4884):
- Who may Claim a Pension Subtraction?
  - TIER 1
    Taxpayers born before 1946 may subtract qualified private pensions up to $56,961 for single or married filing separately filers and $113,922 for joint filers.
  - TIER 2
    Taxpayers born January 1, 1946 through December 31, 1952 should not file Form 4884. A single filer may subtract $20,000 against all income and joint filers may subtract $40,000 against all income as the Tier 2 Michigan Standard Deduction on Schedule 1, line 23.
    
    Taxpayers who receive retirement benefits from employment with a governmental agency exempt from Social Security may deduct up to $35,000 against all income for a single filer and $55,000 for joint filers. If both spouses on a joint return receive Social Security exempt retirement benefits, a standard deduction of $70,000 is allowed.
    
    Surviving spouses who were born after 1945 and have reached the age of 67, have not remarried, and claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died, may elect to the take the larger of the retirement and pension benefits deduction based on the older deceased spouse’s year of birth subject to the limits available for a single filer or the survivor’s Michigan Standard Deduction.
  - TIER 3
    Taxpayers born January 1, 1953 through January 1, 1956 should not file Form 4884. Instead, taxpayers may be eligible for a Tier 3 Michigan Standard Deduction. This deduction is up to $20,000 for a return filed as single or married filing separately, or up to $40,000 for a married filing jointly return. Exemption(s) claimed on MI-1040, lines 9a and 9d, taxable Social Security benefits, military compensation (including retirement benefits), Michigan National Guard retirement benefits and railroad retirement benefits included in AGI may reduce the amount eligible to be claimed on this line. To determine your Tier 3 Michigan Standard Deduction on Schedule 1, line 25, complete Worksheet 2 in the MI-1040 booklet.
    
    Surviving spouses who were born after 1945 and have reached the age of 67, have not remarried, and claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died, may elect to the take the retirement and pension benefits deduction based on the older deceased spouse’s year of birth subject to the limits available for a single filer or the survivor’s Michigan Standard Deduction.
    
    Taxpayers born after January 1, 1956 but before January 2, 1961 who have reached age 62 and receive retirement benefits from employment with a governmental agency exempt from Social Security may deduct up to $15,000 in qualifying retirement and pension benefits. If both spouses on a joint return receive Social Security exempt retirement benefits, the maximum deduction increases to $30,000. See Form 4884, line 18 instructions for more information.
    
    Taxpayers born after January 1, 1956 who receive retirement benefits from a governmental agency exempt from Social Security and were retired as of January 1, 2013 may deduct up to $35,000 in qualifying pension benefits if single or married filing separately or $55,000 if married filing jointly. If both spouses on a joint return qualify, the maximum deduction increases to $70,000.
    
    All other taxpayers born after January 1, 1956, all retirement and pension benefits are taxable and are not entitled to a pension subtraction.
  - Surviving spouse
    If a surviving spouse claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died and the surviving spouse has not remarried, then the surviving spouse may claim the retirement and pension benefits subtraction that would have applied based on the year of birth of the older of the surviving spouse or the deceased spouse. For more information, see instructions.
    - For more information, see:
      - MI-1040 Instruction Booklet
      - Pension Deduction Estimator

Homestead Property Tax Credit
- Line 9 – Taxable Value $143,600
- Line 33 – Total Household Resources $63,000
- The homestead property tax credit phase-out begins when your total household resources exceed $54,000.
- Maximum Property Tax credit allowed $1,600

Home Heating Credit (MI-1040CR-7):

Line 42 – Maximum heating costs $3,430
Line 47 – Home Heating Credit. Multiply line 46 by 90%

Note: The last day to file a 2022 Home Heating Credit is September 30, 2023. No filing extensions are allowed.

TABLE A: 2022 Home Heating Credit (MI-1040CR-7) Standard Allowance

NOTE: If you lived in your homestead for less than 12 months, you must prorate your standard allowance. (see instructions in the MI-1040CR-7 booklet).

EXEMPTIONS	STANDARD ALLOWANCE	INCOME CEILING
0-1	$524	$14,957
2	$706	$20,157
3	$888	$25,357
4	$1,069	$30,528
5	$1,251	$35,729
6	$1,433	$40,929
	+182 for each exemption over 6	+ $5,200 for each exemption over 6

TABLE B: 2022 Home Heating Credit (MI-1040CR-7) Alternate Credit Computation

Exemptions and Maximum Income for the Alternate Credit Computation

EXEMPTIONS	MAXIMUM INCOME
0-1	$16,387
2	$22,051
3	$27,720
4	$30,364

New Tax Treatment of Wagering Losses for Casual Gamblers Under the Michigan Income Tax Act

Michigan Student Loan Forgiveness

On October 6, 2022 / Michigan Taxes, Uncategorized

Gov. Whitmer Announces Tax-Free Public Service Loan Forgiveness

Michiganders do not have to pay state or federal taxes on federal loan forgiveness; approximately 1.4 million Michiganders have student loans

LANSING, Mich. – Today, Governor Gretchen Whitmer announced that student loan relief would not be treated as taxable income in Michigan. Approximately 1.4 million Michiganders eligible for relief will not owe any state taxes for receiving benefits of the Public Service Loan Forgiveness (PSLF) program or other student loan forgiveness. Today’s announcement builds on Governor Whitmer’s actions to make higher education more affordable for Michiganders in every corner of the state. Michigan Student Loan Forgiveness.

“Tax-free student loan forgiveness could benefit up to 1.4 million Michiganders and help keep money in their pockets,” said Governor Gretchen Whitmer. “Michigan PSLF recipients who serve their community will not be taxed for any amount of student loan relief they have received. In Michigan, we value the hard work that all our citizens put in to get the education they need. I will work with anyone to keep lowering the cost of higher education and help students not go into debt in the first place.”

“Our work to open pathways of opportunity for more Michiganders is critical to growing our economy, creating jobs, and building prosperity,” said Lt. Governor Garlin Gilchrist II. “Exempting student loan relief from taxable income builds on the work we have done to boost postsecondary education and skills training in Michigan. Governor Whitmer and I are committed to continuing this work and helping Michiganders access affordable education.”

“I was born in a western Kentucky coal town, daughter of Detroit auto factory workers. It was against the odds that I got my GED, and somehow clawed my way into the Honors College at Western Michigan University. I worked hard, held down a student job, became a Presidential Scholar, and got funding for a fellowship in grad school. Regardless of full fellowship funding, I still needed loans to survive, despite working three jobs during that time. My parents had no way of helping me,” said Melissa Milton-Pung, a project manager at the Michigan Municipal League and PSLF participant. “As the first person in my family to get a bachelor’s degree, then a master’s degree, the decision to go into public service was made easier by the promise of loan relief. It took 17 years for that forgiveness: 10 years of working to qualify, then 7 more years waiting for the program to finally work. I believe in this mission-oriented life and plan to continue to do good work in public service.”

Tax-Free Student Debt Relief

Typically, when debt is forgiven, the IRS treats it as taxable income. However, provisions of the American Rescue Plan have temporarily lifted this requirement. Any federal loans that are discharged between 2021 and 2025 will not be considered taxable income by the federal government. Because state tax law aligns with federal law, this temporary relief will be in effect in Michigan through 2025 as well.

Governor Whitmer’s Bipartisan Investments in Tuition-Free Certificates and Degrees

Since taking office, Governor Whitmer has worked across the aisle to make college more affordable by expanding access to tuition-free certificates and degrees for Michiganders 25 and over and future educators, as well as scholarships for students pursuing degrees at public Michigan universities. She established the bipartisan Michigan Reconnect program, which has put over 100,000 people on the path to tuition-free higher education or skills training. Governor Whitmer’s recent bipartisan education budget created the Mi Future Educator Fellowship, which provides $10,000 scholarships for 2,500 future Michigan educators. The budget also funded Grow Your Own Programs, helping districts train school staff for classroom positions, tuition-free.

Public Service Loan Forgiveness Program Background

If you work in public service, including the military, qualifying non-profits, or federal, state, local, or tribal governments, you may qualify for PSLF. After 10 years of public service employment and 120 on-time loan payments, you may be eligible to have your entire student loan balance forgiven.

As of July 2022, 7,000 Michiganders have had $406 million in loans forgiven under the PSLF. Over 147,000 more Michiganders may be eligible due to the recent PSLF waiver.

New temporary changes to the PSLF program make it easier than ever to have your debt forgiven. Some changes include allowing borrowers to receive credit for past periods of repayment that would otherwise not qualify for PSLF. However, these temporary changes end on October 31, 2022. Public servants should apply at: studentaid.gov/pslf/.

Until October 31, 2022, the U.S. Department of Education is offering public servants working in government and eligible non-profits a second chance to qualify for student loan forgiveness. An estimated 154,000 public service workers in Michigan could be eligible for student loan debt relief under the PSLF waiver. According to the Office of Federal Student Aid’s June report, over 6,000 Michiganders have taken advantage of the PSLF waiver and have had $358 million in loans forgiven.

The recent changes to the federal PSLF program allow previously ineligible borrowers – those with a non-Direct loan, who are not enrolled in an income driven repayment plan, who have missed a repayment, or made a partial repayment in the past – to receive credit toward loan forgiveness for the years they worked in government or a qualifying non-profit.

To apply for the PSLF waiver, borrowers should:

Visit the PSLF Employer Search to verify their employer qualifies for PSLF.
Submit a certified copy of the PSLF Certification Form to the U.S. Department of Education before October 31.

If borrowers have questions regarding their individual situation regarding Michigan Student Loan Forgiveness, they can visit or call FedLoan Servicing at 1-855-265-4038.

Congress created PSLF to recruit and retain top talent in the public sector workforce. If an individual works for federal, state, local, or tribal government or a qualifying non-profit for 10 years, makes 120 full, on-time loan payments, and submits all required paperwork, the federal government forgives all of their remaining student loan debt.

Though PSLF was established in 2007, it has faced implementation challenges. Prior to the PSLF Waiver, only 2.1% of eligible borrowers had been approved for loan forgiveness. The recent PSLF program overhaul is the U.S. Department of Education’s attempt to deliver on the program’s promise and thank the public service workforce for their dedication and support.

The PSLF: Champions Toolkit is available for employers and professional associations to help them amplify the PSLF waiver opportunity and connect borrowers to resources. The toolkit includes sample email correspondence and social media posts. It is available for download here.

Questions regarding Michigan Student Loan Forgiveness? Contact Us

House passes Build Back Better Act with universal paid leave

On November 22, 2021 / Uncategorized

BBB Act, Universal Paid Leave – Journal Of Accountancy

The nearly $2 trillion Build Back Better (BBB) Act, passed Friday by the U.S. House of Representatives, contains many items of interest to CPAs, their clients, and their employers.

This article examines nontax provisions in the bill, H.R. 5376. A separate article covers the myriad tax-related items in the bill.

The vote passing the bill was 220-213.

The House’s passage of the BBB Act came after months of negotiations between moderate and progressive Democrats in the House and the U.S. Senate. House Speaker Nancy Pelosi, D-Calif., had hoped to have the House vote on the bill on Nov. 5, but those plans were scrapped when several moderate Democrats said they would not vote on the bill until the Congressional Budget Office released its official estimate of the impact on the U.S. deficit.

The CBO’s estimate on the bill adding $160 billion to the deficit over 10 years was finalized on Thursday.

The bill now goes to the U.S. Senate, where it is expected to undergo a couple of weeks of assessment to determine if all provisions of the bill qualify to be passed through the budget reconciliation process. Reconciliation allows certain budget-related bills to be passed by as few as 51 votes and avoid being stopped by a filibuster, which requires 60 votes to end.

The 100 Senate seats are split 50-50 between Democrats and Republicans, with the chamber’s president, Vice President Kamala Harris, representing the tie-breaking vote. Republicans have been unified against the BBB Act, leaving Democrats with the chore of crafting legislation that adheres to reconciliation rules and is palatable to all 50 of their senators. The legislation looks unlikely to escape the Senate chambers in its current form, with Sen. Joe Manchin, D-W.Va., telling CNN on Thursday that he has not yet decided whether to support the bill.

BUSINESS ITEMS OF NOTE IN H.R 5376

Universal paid leave

In one of its most significant and contentious provisions, the BBB Act would provide all U.S. workers with paid leave for the first time. Specifically, the bill guarantees four weeks of paid leave to all workers who are:

New parents;
Dealing with their own serious medical conditions; or
In need of leave to care for a loved one with a serious medical issue.

The benefits would be provided to workers in one of three ways:

Via a public program run by the Social Security Administration that would cover all public- and private-sector workers without regard to employer size, including part-time and self-employed individuals.
An already-enacted “legacy state” paid leave program that provides benefits equivalent to, or better than, the federal benefit, and for which the state would be reimbursed up to what it would have cost to cover their workers in the federal program.
A plan (self-insured or via an insurer) from an employer that voluntarily chose to offer 100% of employees paid leave equal to or better than the public benefit in every respect. The leave policy must include job reinstatement protection even if a worker is not covered by the Family and Medical Leave Act. Employers whose plans meet these conditions would be reimbursed for the lesser of 90% of the national average cost of paid leave benefits or 90% of their insurance premium.

Small business investments

The BBB Act includes around $5 billion in funding to support small businesses.

Most of that money, $3.385 billion, is designated to improve the ability of small employers and entrepreneurs to access capital. Specifically, the bill allocates:

Almost $2 billion in total funding over a 10-year period to fund direct loans for the smallest businesses and government contractors under the 7(a) lending program administered by the U.S. Small Business Administration (SBA).
$950 million in immediate, direct fee relief for new borrowers of the SBA 7(a) and 504 loans. The funding will be available until Sept. 30, 2026, to reduce or waive fees for loans of $2 million or less.
$60 million to diversify and create equity within the Small Business Investment Company (SBIC) program.
$275.9 million to enhance and improve the Community Advantage program and also provide the SBA with authority to partner with not-for-profit lenders to deliver capital through the 7(a) loan program.
$100 million to establish a pilot program for providing capital for cooperatives.

Other small business-related investments include:

$1 billion over a 10-year period to establish a national network of “uplift incubators” to assist new businesses and small government contractors, with the goal of sparking economic development in underrepresented communities.
$200 million over 10 years to provide cash grants of at least $100,000 to growth accelerators to expand their capabilities to assists small businesses focused on technology.

Other business-related provisions

The BBB Act invests about $390 billion to fund universal pre-kindergarten programs for all 3- and 4-year-olds and to improve access to affordable child care. Democrats assert that child care costs are too expensive for many families, forcing millions of Americans out of the workforce and contributing to the labor shortage that has affected millions of employers. The BBB Act would ensure that nearly all families of four earning up to $300,000 would pay no more than 7% of their income on child care. In addition, the act would provide funding for child care providers to raise wages for their workers and add staff to serve more families.

Other business-related allocations scattered through the 2,100-page bill include:

$5 billion for the Department of Commerce to identify and monitor critical vulnerabilities in the manufacturing supply chain.
$1 billion in grants to help minority-owned businesses launch and expand their operations. The bill provides another $400 million to expand the Minority Business Development Agency and $200 million to establish rural business centers that primarily serve rural minority-owned businesses.
$500 million for the Federal Trade Commission to create and operate a new bureau dedicated to stopping unfair and deceptive acts and practices related to privacy violations, data security incidents, identity theft, and other data abuses.

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Eligible Paycheck Protection Program expenses now deductible

On January 6, 2021 / Uncategorized

IR-2021-04, January 6, 2021

WASHINGTON — The Treasury Department and the Internal Revenue Service issued guidance PDF today allowing deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program (PPP).

Today’s guidance, Revenue Ruling 2021-02 PDF, reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021(Act), Public Law 116-260,which was signed into law on December 27, 2020.

The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.

Revenue Ruling 2021-02 obsoletes Notice 2020-32 and Revenue Ruling 2020-27. This obsoleted guidance disallowed deductions for the payment of eligible expenses when the payments resulted (or could be expected to result) in forgiveness of a covered loan.

For more information about this, the COVID-related Tax Relief Act of 2020, and other tax changes, visit IRS.gov or call your local ATS office.

UIA Email Scam Alert

On December 17, 2020 / Uncategorized

Michigan Attorney General Dana Nessel today issued an important alert advising residents to be aware of a current scam taking advantage of claimants who are collecting unemployment benefits.

Claimants are receiving an email from a Gmail account that appears to be from the Unemployment Insurance Agency (UIA) asking for personal information. The scammer is also attaching what looks like an actual news release from the UIA in an apparent effort to strengthen the credibility of the email.

“There is no government agency, state or federal, that uses Gmail for official purposes,” Nessel said, noting the scammer’s email address. “Michigan residents should ALWAYS examine the full email address if the sender is requesting their personal information.”

If you received this email, do not respond. UIA would never ask you to reply to an email with your personal information. Responses to ID verification requests from UIA should only be uploaded through your secure Michigan Web Account Manager (MiWAM) account online at the UIA’s website, where you can also learn more about protecting yourself from identity theft.

Anyone who has fallen for this scam should immediately Report Fraud or Identity Theft with the UIA. They should also monitor their banking and account information each time they certify for benefits.

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