New Developments for Tax Year 2018

New Tax Developments

Annual mailing of instruction booklets

The MI-1040, MI-1040CR-2, MI-1040CR-5 and MI-1040CR-7 instruction booklets will be mailed to taxpayers who paper filed their 2017 return on Michigan Department of Treasury forms. Taxpayers who e-filed or had a tax preparer complete their forms will not be mailed a booklet.

Forms and instructions may be viewed and/or downloaded from our Web site beginning in January 2019. In addition, commonly used forms will continue to be available at Michigan Department of Treasury offices, most public libraries, Northern Michigan post offices, and Michigan Department of Health and Human Services (MDHHS) county offices.

Note: Bulk forms are distributed to libraries and post offices throughout the state before they are available in Michigan Department of Treasury offices. Therefore forms may not be requested through the Michigan Department of Treasury Customer Contact Center until mid-February.

Reminder: All pages of all forms must be completed and filed to be considered a complete return.

Collections accepts credit and debit card payments for past due debts

The Office of Collections accepts credit/debit card payments for online payments only. There is a processing fee of 1.5% for all transactions. You can use a valid Discover, MasterCard or Visa credit card or a valid MasterCard or Visa debit card to make payment. View more information.

IRS Refund Delays in 2019 https://www.irs.gov/newsroom/path-act-tax-related-provisions

Possible Refund Delay for Some Early Filers:

The PATH Act mandates that the IRS not issue a refund on tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit until Feb. 15. The additional time helps the IRS stop fraudulent refunds from being issued to identity thieves and fraudulent claims with fabricated wages and withholdings.

In addition, identity theft and refund fraud safeguards put in place by the IRS may result in delayed processing of tax returns. This delay will not impact Michigan Department of Treasury’s processing of individual income tax returns, unless safeguards have been put in place at the state level.

 


Tax form information and changes for 2018

  • Exemption allowances and the tax rate:
     
    • $4,050 for personal and dependent exemptions
    • $2,700 for special exemptions
    • $400 for qualified disabled veterans
    • 4.25% tax rate 
  • Schedule 1 Additions and Subtractions:
    • Line 24 - Michigan Standard Deduction. Taxpayers who were born during the period January 1, 1946 through January 1, 1952, that reached age 67 on or before December 31, 2018 may be eligible for a subtraction of $20,000 for single filers or $40,000 for joint filers against all income and will no longer deduct retirement and pension benefits. 

      Note: Filers who qualify for the Michigan Standard Deduction should not file Form 4884.
       
    • Line 26 - Dividend/interest/capital gains deduction. Taxpayers born prior to 1946 may subtract dividends, interest and capital gains included in AGI. This subtraction is limited to $11,495 for taxpayers filing single or married filing separately or $22,991 for joint filers, less any deduction for retirement benefits. (See page 15 in the MI-1040 Instruction Booklet)

      Dividends/Interest/Capital Gain Deduction Estimator

       
  • New Form MI-461 Excess Business Loss Limitation

The federal 2017 Tax Cuts and Jobs Act tax reform enacted a limitation on business losses that are included in Adjusted Gross Income (AGI). The federal tax reform limits business losses in excess of business income to $250,000 for filers who are single or married filing separately or $500,000 for joint filers.  Filers with a business loss limitation who filed a federal form 461 are required to file MI-461.

  • Homestead Property Tax Credit Claim (MI-1040CR):

Updates for the Homestead Property Tax Credit for tax year 2018:

  • The percentage of gross rent paid increased from 20% to 23%
  • The total household resources limit increased from $50,000 to $60,000
  • The percentage of total household resources decreased from 3.5% to 3.2%
  • The maximum credit increased from $1,200 to $1,500
     
  • Michigan Voluntary Contributions Schedule (Form 4642) 
     
    • Charitable Funds available for tax year 2018
      • American Red Cross Michigan Fund
      • Animal Welfare Fund
      • Children’s Trust Fund – Supporting and Strengthening Families in Michigan
      • Fostering Futures Scholarship Fund (New)
      • Kiwanis Fund (New)
      • Lions of Michigan Foundation Fund (New)
      • Michigan World War II Legacy Memorial Fund (New)
      • Military Family Relief Fund
      • United Way Fund

        Note: Contributions to these funds will increase your tax liability or reduce your refund.


         
  • Pension Schedule (Form 4884):

      TIER 1
    • Taxpayers born before 1946 may subtract private pensions up to $51,570 for single or married filing separately filers and $103,140 for joint filers.

                 TIER 2

  • Taxpayers born January 1, 1946 through January 1, 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 Michigan Standard Deduction on Schedule 1, line 24.
  • Taxpayers born after January 1, 1952 through December 31, 1952 may subtract retirement and pension benefits up to $20,000 for single filers and up to $40,000 for married filing jointly
     

                 TIER 3   

Taxpayers born on or after January 1, 1953 but before January 2, 1957 who have reached age 62 and receive retirement benefits from employment exempt from Social Security may deduct up to $15,000 in qualifying retirement and pension benefits.

Taxpayers born after 1952, received retirement benefits from SSA exempt employment and were retired as of January 1, 2013 may deduct up to $35,000in qualifying pension benefits if single or married filing separately or $55,000 if married filing jointly.

All other taxpayers born after 1952, all retirement and pension benefits are taxable and are not entitled to a pension subtraction.

For more information, see page 16 in the MI-1040 Instruction Booklet

 Pension Deduction Estimator
 

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

    Standard Allowances and Income Ceilings for 2018 (See Tables A and B below).           

               Note: The last day to file a 2018 Home Heating Credit is September 30, 2019. No filing extensions
               are allowed.
 

TABLE A: 2018 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

$468

$13,357

2

$635

$18,129

3

$801

$22,871

4

$967

$27,614

5

$1,134

$32,386

6

$1,300

$37,129

 

+ $166 for each
exemption over 6

+ $4,743 for each
exemption over 6


TABLE B: 2018 Home Heating Credit (MI-1040CR-7) Alternate Credit Computation

Exemptions and Maximum Income for the Alternate Credit Computation

EXEMPTIONS

MAXIMUM INCOME

0-1

$14,472

2

$19,475

3

$24,483

4

$24,918

 

Additional Information

 

Direct Debit

        Taxpayers may elect to use direct debit when e-filing their 2017 or 2018 tax due returns.

        A direct debit is a tax payment that Michigan Department of Treasury electronically withdraws from the    

        taxpayer’s bank account using the bank information provided on the electronically filed return.  
        Submitting the electronic return with the direct debit information provided authorizes the
        Michigan Department of Treasury to withdraw the funds from their bank
account. Direct debit is

        available for both the Michigan and City of Detroit returns.
        
        Note:  In the event the payment is returned as unpaid, the Michigan Department of Treasury may

        charge a return item fee, up to the maximum amount allowed by law. Penalty and interest will

        accrue on any tax due that has not been paid by the original due date of the return.

e-Payments

Individual Income Tax (IIT) filers have the option of making payments electronically using the Michigan    
Department of Treasury’s e-Payments system
. Payments can be made by using, electronic payment        
(eCheck), credit card or debit card.

Free E-file

E-file lets you submit your Michigan, City of Detroit and federal individual income tax returns using a computer instead of mailing paper returns. You can e-file your Michigan and/or City of Detroit return separately from your federal return (State Standalone e-file). If you choose to e-file your Michigan tax return, visit Treasury’s Web site at MIfastfile.org for a list of e-file resources, how to find an e-file provider, and more information on free e-file services.

There are many free tax preparation services available. To find out if you qualify and/or to locate a free preparation site near you, visit the following sites:

  • Free tax preparation assistance offered by IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the elderly programs. Enter your zip code to locate a site near you. http://irs.treasury.gov/freetaxprep/
  • You may be eligible to prepare and e-file your federal return for free with Free File through the IRS Web site.

Taxpayer’s Rights & Responsibilities
 

A guide to help taxpayers understand their tax related rights and responsibilities.
 

Treasury Offset Program (TOP)
 

Michigan Department of Treasury has entered into an agreement with the Internal Revenue Service to intercept, or offset, federal tax refunds and federal payments for delinquent Michigan Department of Treasury income tax debts.

View more TOP information
 

Pension Estimator and Dividend/ Interest/Capital Gain Estimator
 

Certain amounts of pension distributions and dividend/interest/capital gains can be subtracted from Michigan taxable income. An estimator is available on Michigan Department of Treasury's Web site to assist taxpayers in determining what amounts can be subtracted and to assist in making income tax return preparation easier.

Property Tax Credits / Refunds
 

Michigan homestead property tax credit and State refunds from Michigan Department of Treasury received in 2018 may be taxable on your 2018 U.S. 1040. If you have questions about the taxability (for federal tax purposes) of your refunds, call the IRS at 800-829-1040.


Filing Extension Granted for Military Personnel Serving in a Combat Zone
 

United States military personnel serving in a combat zone on April 15, 2019, will be given 180 days after leaving the combat zone to file their federal and State tax returns and will be exempt from penalties and interest. When e-filing, service men and women serving in combat zones should enter the words "Combat Zone" in the preparer notes. When filing a paper return, print "Combat Zone" in
ink on the top of page 1. View More Information for Members of the Military


MI-1040ES Forms No Longer Mailed to Taxpayers Using Preparers
 

Michigan Department of Treasury does not mail preprinted Estimated Individual Income Tax Vouchers (MI-1040ES) to taxpayers who use tax preparers to complete and file their income tax returns.
 

Statute of Limitations for Prior Year Returns and Credits
 

A taxpayer must file to claim a refund with the Michigan Department of Treasury within four years from the date set for the filing of the original return. For example: You must file a 2014 Michigan Individual Income Tax Return (MI-1040/MI-1040X-12) and/or a Homestead Property Tax Credit
(MI-1040CR/MI-1040CR-2) on or before April 15, 2019.