PDF 2017 MI Treasury Tax Text

[Pages:3]2017

TAX TEXT

Michigan Department of Treasury

2017 TAX TEXT

TABLE OF CONTENTS

ADMINISTRATIVE INFORMATION

Page

Overview ............................................................................................................................. 1

Administrative Information ................................................................................................. 1

Web Services ............................................................................................................ 1

Individual Income Tax (IIT) Web-Services.............................................................. 2

IIT Terms .................................................................................................................. 2

Why Web Services Might Indicate Treasury Has Not Received an Income Tax

Return .................................................................................................................... 3

Business Taxes Web Services................................................................................... 3

E-Registration for Michigan Taxes .......................................................................... 4

Michigan Treasury Online Services ......................................................................... 4

Online Filing and Payment Options in 2017 ............................................................ 5

Disclosure Guidelines.......................................................................................................... 5

Identity Theft ....................................................................................................................... 6

Taxpayer Rights and Responsibilities ................................................................................. 7

The Billing Process................................................................................................... 7

Payment of the Additional Tax ................................................................................. 8

Jeopardy Assessments for Extreme Cases ................................................................ 8

Refunds ..................................................................................................................... 9

Refund Different Than Expected .............................................................................. 9

The Appeals Process................................................................................................. 9

Informal Conference ................................................................................................. 9

Michigan Tax Tribunal (MTT)................................................................................. 10

Court of Claims......................................................................................................... 10

Offer-In Compromise Program................................................................................. 13

Treasury Reporting Requirements ............................................................................ 13

Administrative Dispute Resolution...................................................................................... 13

Forms .................................................................................................................................. 14

Availability of Tax Forms......................................................................................... 14

Penalty and Interest ............................................................................................................. 15

Interest ...................................................................................................................... 16

Waiver of Penalty ..................................................................................................... 16

Intercepting Refunds............................................................................................................ 17

Web Site .............................................................................................................................. 17

Contact Numbers ................................................................................................................. 17

Contact Information Online ...................................................................................... 17

Protect Taxpayer's Privacy....................................................................................... 18

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Helpful Information ............................................................................................................. 18

Calling ...................................................................................................................... 18

Writing ...................................................................................................................... 18

Making a Payment .................................................................................................... 19

Treasury Letters ........................................................................................................ 19

E-mail LISTSERV for Tax Professionals................................................................. 19

Summary of Unclaimed Property Law ................................................................................ 20

Who Must Report ..................................................................................................... 20

What Must Be Reported ........................................................................................... 20

Reporting Due Date and Penalty for Noncompliance .............................................. 20

How to Report .......................................................................................................... 20

Noncompliance With Unclaimed Property Reporting Requirements ....................... 21

Voluntary Disclosure Program ................................................................................. 21

How Owners Locate Unclaimed Property Reported to the State of Michigan ......... 21

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INDIVIDUAL INCOME TAX

Page

What's New ......................................................................................................................... 22

Revenue Administrative Bulletins (RAB) and Directives ........................................ 22

Senate Bill 0606 of 2015 (Public Act (PA) 144 of 2016) Principal Residence

Exemption.............................................................................................................. 22

House Bill 5131 of 2015 (PA 0158 of 2016) Flow-Through Withholding

Repealed ................................................................................................................ 23

Individual Income Tax Composite Return................................................................ 23

Michigan Achieving a Better Life Experience Program (ABLE) ............................ 23

City of Detroit Individual Income Tax Returns ........................................................ 23

Forms .................................................................................................................................. 23

Individual Income Tax Forms................................................................................... 23

Mailing Addresses .................................................................................................... 24

Substitute Forms Must Be Approved........................................................................ 24

IIT Electronic Filing Programs ............................................................................................ 24

How Fed/State (Linked) Electronic Filing Works.................................................... 26

How State Unlinked (Standalone) Electronic Filing Works..................................... 26

Who May Participate ................................................................................................ 26

Application Process and Acceptance Process........................................................... 27

Electronic Michigan Returns .................................................................................... 28

Nonelectronic Portion of Michigan Returns............................................................. 32

Michigan E-file Signature Process ........................................................................... 32

For Tax Preparers ..................................................................................................... 33

Volunteer Groups ..................................................................................................... 33

Tax Refund and Payment Information................................................................................. 33

State Returns ............................................................................................................. 33

City Returns .............................................................................................................. 35

Post-Filing Information ....................................................................................................... 36

Mailing Addresses .................................................................................................... 36

Amended Michigan Income Tax Return (MI-1040X) AMD ................................... 36

Summary of Changes for 2017 ............................................................................................ 37

Summary of Changes for Prior Years.................................................................................. 38

Filing Requirements............................................................................................................. 38

Filing a MI-1040 Return........................................................................................... 38

Factors to Determine Domicile ................................................................................. 38

Nonresident Aliens ................................................................................................... 39

Taxability of Income Derived Within Indian Country ............................................. 39

Estimated Income Tax .............................................................................................. 40

e-Payments................................................................................................................ 42

Seafarers, Farmers, and Commercial Fishermen ...................................................... 42

Exemptions .......................................................................................................................... 42

Definitions of Michigan Special Exemptions ........................................................... 43

Qualified Disabled Veteran Exemption .................................................................... 43

Part-Year and Nonresident ....................................................................................... 43

Claimed as a Dependent ........................................................................................... 43

Michigan Income Tax Treatment of Child's Unearned Income.......................................... 44

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Miscellaneous Additions/Deductions .................................................................................. 44

Eliminating Income and Expenses of Producing Oil and Gas .................................. 44

Renaissance Zones............................................................................................................... 44

Retirement and Pension Benefits ......................................................................................... 45

Employer Plans ......................................................................................................... 45

Individual Plans ........................................................................................................ 46

Pension Limitations Based on Date of Birth............................................................. 47

Income Tax For Retirement Benefits Effective For Tax Year 2017......................... 48

Unlimited Public Pension Subtraction ..................................................................... 49

Private Pensions........................................................................................................ 50

Railroad Pension Benefits......................................................................................... 50

Pension Subtraction Examples.................................................................................. 50

Individual Retirement Accounts (IRAs) ................................................................... 51

2017 Pension Subtraction Table for Tier 1 Retirees................................................. 51

1099 R Distribution Codes ....................................................................................... 52

Deferred Compensation ....................................................................................................... 53

Interest, Dividends, and Capital Gains Deduction For Senior Citizens Born

Before 1946 .............................................................................................................. 53

529 Education Plans ............................................................................................................ 54

Michigan Education Savings Program (MESP) ....................................................... 54

Michigan Education Trust (MET) ............................................................................ 55

Coverdell Educational Savings Account ................................................................. 55

Michigan Achieving a Better Life Experience Program (ABLE) ............................ 55

Nonresidents' Taxable Income ............................................................................................ 56

Withholding for Nonresidents .................................................................................. 57

Flow-Through Entity Distribution of Income and Losses (FTE) ........................................ 57

Business, Rental, and Royalty Activity Worksheet .................................................. 58

Composite Individual Income Tax Return for Nonresident

Partners/Shareholders/Members ........................................................................... 59

Apportionment of Income From Flow-Through Entities Under the

Unitary Business Principle ....................................................................................... 59

Single Entity Apportionment .................................................................................... 60

Combined Multiple Entity Apportionment ............................................................... 60

Adjustments of Capital Gains and Losses .......................................................................... 60

Net Operating Loss.............................................................................................................. 61

Gambling Income ................................................................................................................ 61

Military Pay ......................................................................................................................... 62

Principal Residence Exemption ........................................................................................... 63

Principal Residence Exemption Records Review..................................................... 63

Verifying Documentation ......................................................................................... 64

Nonrefundable Credits......................................................................................................... 64

Credit for Income Tax Imposed by Qualified Government

Units Outside Michigan...................................................................................... 64

Historic Preservation Income Tax Credit ................................................................. 64

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Refundable Credits .............................................................................................................. 65

Homestead Property Tax Credit ............................................................................... 65

Senior Credit Reduction ........................................................................................... 65

Homestead Property Tax Credit Phase Out .............................................................. 66

Special Situations...................................................................................................... 68

Agricultural Gross Receipts...................................................................................... 68

Farmland Preservation Tax Credit ............................................................................ 75

Tips to Expedite Processing...................................................................................... 76

Sale of Land.............................................................................................................. 80

Reinstatement of a Development Rights Agreement ................................................ 81

Farmland Preservation Tax Credit When Land Is Inherited ..................................... 81

Taxable Portion of Farmland Preservation Tax Credit ............................................. 81

Farmland Taxes Eligibility Chart ............................................................................. 82

Repayments Under the Claim of Right Doctrine ...................................................... 83

Earned Income Tax Credit ........................................................................................ 83

Home Heating Credit ................................................................................................ 84

Cancellation of Debt ............................................................................................................ 85

Relief From Tax Liability .................................................................................................... 86

Nonobligated Spouse Allocation .............................................................................. 86

Relief From Joint and Several Liability on Joint Returns......................................... 86

IRS Match............................................................................................................................ 86

Taxability of Federal Obligations........................................................................................ 87

Income Allocation Chart...................................................................................................... 89

Income and Deductible Items, Summary Chart ................................................................... 90

Michigan Cities Levying an Income Tax ............................................................................ 96

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CORPORATE INCOME TAX and MICHIGAN BUSINESS TAX

Page

Corporate Income Tax ................................................................................................... 97

What's New ................................................................................................................... 97

Overview........................................................................................................................ 97

Definitions ........................................................................................................... 97

Filing Requirements ............................................................................................ 98

Tax Base .............................................................................................................. 103

Nexus................................................................................................................... 104

Apportionment..................................................................................................... 104

Credits ................................................................................................................. 105

Unitary Business Groups (UBGs) ....................................................................... 107

Insurance Companies .......................................................................................... 108

Financial Institutions ........................................................................................... 109

Contacting Treasury ............................................................................................ 110

Michigan Business Tax.................................................................................................. 111

What's New ......................................................................................................... 111

Overview........................................................................................................................ 111

Filing Requirements ............................................................................................ 112

Tax Liability ........................................................................................................ 114

Credits ................................................................................................................. 115

UBGs ................................................................................................................... 117

Helpful Hints for Filing the MBT Return ........................................................... 119

Contacting Treasury ............................................................................................ 119

Credits Available on Return .......................................................................................... 121

Unitary Business Group Credit Information.................................................................. 123

CIT and MBT Electronic Filing..................................................................................... 124

General Information ............................................................................................ 124

CIT Forms and Schedules ................................................................................... 126

MBT Forms and Schedules ................................................................................. 126

Attachments to CIT and MBT Returns ............................................................... 127

Attachments to MBT Returns.............................................................................. 127

CIT and MBT Fed/State E-file Program ............................................................. 128

How Fed/State (Linked) E-file Works ................................................................ 128

How State Standalone (Unlinked) E-file Works ................................................. 128

Application Process ............................................................................................. 129

Acceptance Process ............................................................................................. 129

Signature Process for Fed/State (Linked) Returns .............................................. 129

Signature Process for State Standalone (Unlinked) Returns ............................... 130

For More Information.......................................................................................... 130

City of Detroit Corporate Income Tax ................................................................ 130

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FLOW-THROUGH WITHHOLDING

Page

What's New ................................................................................................................... 131

Overview........................................................................................................................ 131

Forms ................................................................................................................... 131

Mailing Addresses ............................................................................................... 132

Withholding Requirements.................................................................................. 132

Filing and Payment Requirements ...................................................................... 134

Quarterly Payments ............................................................................................. 134

Annual Reconciliation Form ............................................................................... 134

Reporting Withholding to Members.................................................................... 134

Flow-Through Withholding for Members That Are Corporations or

Other Flow-Through Entities ........................................................................ 135

Flow-Through Withholding for Members That Are Nonresident Individuals.... 136

Composite Tax Return for Nonresident Individual Members............................. 138

Exemptions From Flow-Through Withholding .................................................. 138

Contacting Treasury ............................................................................................ 139

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