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Scenario 6

Scenario 6

John and Susan

  • Filing Joint
  • John was born in 1948, and received public pension benefits of $45,000 and $5,000 in wages from a part-time job.
  • Susan was born in 1951 and received public pension benefits of $60,000.
  • Patrick, Susan’s deceased spouse, was born in 1952 and died in 2015.
  • Susan is receiving $25,000 in surviving spouse pension benefits from Patrick’s service as a City of Detroit firefighter.

     
Step 1 - Complete "Which Section of Form 4884 SHOULD I COMPLETE"

John and Susan refer to the Form 4884 instructions in the MI-1040 Booklet and answer the questionnaire as follows:

  • Question 1 - Yes
  • Question 2 - Yes, as Susan is receiving Patrick's retirement and pension benefits from his service as a Qualified Fire, Police, and County Corrections Officer. Since John is the older spouse and has reached the age of 67, they are instructed to complete and compare Worksheet 2 and Section A of Form 4884.
 
Step 2 - Complete worksheet 2

John and Susan complete Worksheet 2 and determine that their Tier 2 Michigan Standard Deduction would equal $55,000.

Susan is receiving retirement and pension benefits from Patrick’s SSA exempt employment with a governmental agency. They had previously checked box 24G on Schedule 1, which indicates their maximum Tier 2 Michigan Standard Deduction would increase by $15,000.

 

 
Step 3 - Complete Section A

John and Susan then review Section A of Form 4884 to determine which provides them the greater benefit.

  • Line 9 - Enters $128,080 as they are married filing jointly.
  • Line 10 – Leave blank as it does not apply to them.
  • Line 11 – Enters $128,080 after subtracting line 10 from line 9.
  • Line 12. – Enters $130,000, their total public retirement and pension benefits.
  • Line 13 – Enters $0 after subtracting line 12 from line 11.
  • Line 14 – Enters $0, their total private retirement and pension benefits.
  • Line 15 – Enters $0, the smaller of lines 13 or 14.
  • Line 16 – Enters $130,000 after adding lines 12 and 15.
Step 4 - Choose the best subtraction

John and Susan elect to claim the retirement and pension benefit subtraction ($130,000) instead of their Tier 2 Michigan Standard Deduction ($55,000) because it provides them a greater benefit.

Step 5 - Complete form 4884 along with section A

John and Susan proceed with completing Form 4884 and Section A.

They enter their information on lines 1 through 5 and check box 6a but skip box 6b.

Since Susan is receiving retirement and pension benefits from a deceased spouse she completes Part 2.

In Part 3, they fill out a separate line for each retirement and pension benefit distribution, checking the box for “Public” under 8A for their public retirement and pension benefits.

For any amount received from a deceased spouse they check the box under 8B on the corresponding line.

Step 6 - Carry to schedule 1

John and Susan carry the amount from Form 4884, line 16 (Section A) to Schedule 1, line 27.