2019 TAX TEXT

Michigan State University and the University of Michigan are affirmative action/equal opportunity employers.

5333 (06-23)

2023 Tax Text ? Michigan Department of Treasury

2023 Tax Text

Michigan Department of Treasury

Income Tax School

Tax Practitioner Institutes

Sponsored by Michigan State University Department of Agricultural, Food and Resource Economics and

the University of Michigan, Conference Services, in cooperation with the

Michigan Department of Treasury

2023 TAX TEXT

TABLE OF CONTENTS

ADMINISTRATIVE INFORMATION

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

eServices ................................................................................................................... 1 Individual Income Tax (IIT) eServices..................................................................... 2 IIT Terms .................................................................................................................. 2 Why eServices Might Indicate Treasury Has Not Received an Income Tax

Return .................................................................................................................... 3 Business Taxes eServices ......................................................................................... 3 E-Registration for Michigan Taxes .......................................................................... 4 Michigan Treasury Online Services ......................................................................... 4 Online Filing and Payment Options in 2023 ............................................................ 5 Disclosure Guidelines.......................................................................................................... 5 Identity Theft ....................................................................................................................... 6 Warning Signs of Identity Theft ............................................................................... 7 Taxpayer Rights and Responsibilities ................................................................................. 7 The Billing Process................................................................................................... 8 Payment of the Additional Tax................................................................................. 8 Jeopardy Assessments for Extreme Cases ................................................................ 9 Refunds ..................................................................................................................... 9 Refund Denied or Different Than Expected ............................................................. 9 The Appeals Process................................................................................................. 9 Informal Conference................................................................................................. 10 Michigan Tax Tribunal (MTT)................................................................................. 10 Court of Claims ........................................................................................................ 11 Appeals Process Flow Charts ................................................................................... 12 Offer in Compromise Program ............................................................................................ 14 Alternative Dispute.............................................................................................................. 14 Office of the Taxpayer Advocate ........................................................................................ 15 Forms .................................................................................................................................. 15 Availability of Tax Forms ........................................................................................ 15 Penalty and Interest ............................................................................................................. 16 Interest ...................................................................................................................... 17 Waiver of Penalty ..................................................................................................... 17 Intercepting Refunds............................................................................................................ 18 Website ................................................................................................................................ 18 Contact Numbers ................................................................................................................. 18 Contact Information Online...................................................................................... 19 Protect Taxpayers' Privacy....................................................................................... 19 Helpful Information ............................................................................................................. 19 Calling ...................................................................................................................... 19 Writing...................................................................................................................... 20 Making a Payment .................................................................................................... 20 Treasury Letters ........................................................................................................ 20 Email LISTSERV for Tax Professionals.................................................................. 20 Summary of Unclaimed Property Law ................................................................................ 21

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Who Must Report ..................................................................................................... 21 What Must Be Reported ........................................................................................... 21 Reporting Due Date and Penalty for Noncompliance .............................................. 21 How to Report .......................................................................................................... 21 Noncompliance With Unclaimed Property Reporting Requirements....................... 22 Voluntary Disclosure Program ................................................................................. 22 How Owners Locate Unclaimed Property Reported to the SOM............................. 22

ELECTRONIC FILING PROGRAMS

Individual Income Tax (IIT)................................................................................................ 23 How Fed/State (Linked) E-File Works..................................................................... 24 How State Unlinked E-File Works .......................................................................... 25 Who May Participate ................................................................................................ 25 Application and Acceptance Process........................................................................ 25 Michigan Portion of the Electronic Return............................................................... 26 Electronic Michigan Returns .................................................................................... 26 Nonelectronic Portion of Michigan Returns............................................................. 31 Michigan E-File Signature Process .......................................................................... 32

Fiduciary Income Tax.......................................................................................................... 33 How Fed/State (Linked) E-File Works..................................................................... 33 How State Unlinked E-File Works ........................................................................... 33 Who May Participate ................................................................................................ 34 Application and Acceptance Process........................................................................ 34 Michigan Portion of the Electronic Return............................................................... 34 Electronic Michigan Returns .................................................................................... 35 Nonelectronic Portion of Michigan Returns............................................................. 36 Michigan Fiduciary E-File Signature Process .......................................................... 36

Corporate (CIT) and Michigan Business Tax (MBT) ......................................................... 37 Application and Acceptance Process........................................................................ 37 Electronic Michigan Returns .................................................................................... 39 Attachments to CIT and MBT Returns..................................................................... 40 Attachments to MBT Returns................................................................................... 40 CIT and MBT Fed/State E-File Program.................................................................. 41 How Fed/State (Linked) E-File Works..................................................................... 41 How State Standalone (Unlinked) E-File Works...................................................... 41 Application and Acceptance Process........................................................................ 42 Acceptance Process .................................................................................................. 42 Michigan E-File Signature Process .......................................................................... 43 For More Information ............................................................................................... 43 City of Detroit Corporate Income Tax...................................................................... 43

Sales, Use, and Withholding (SUW) ................................................................................... 43 How SUW E-File Works .......................................................................................... 44 Application and Acceptance Process........................................................................ 45 Type of Filings Accepted ......................................................................................... 45 Electronic Michigan Data ......................................................................................... 45 Nonelectronic Documents ........................................................................................ 46 Exclusions From E-File ............................................................................................ 46 E-File Signature Process........................................................................................... 46 Payment Methods ..................................................................................................... 46

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Refunds ..................................................................................................................... 47 City of Detroit Income Tax Withholding ................................................................. 47

INDIVIDUAL INCOME TAX

What's New ......................................................................................................................... 48 Legislation ................................................................................................................ 49 Increased Exemptions............................................................................................... 49 Income Tax Rate....................................................................................................... 49 Anatomical Gift Donor Registry .............................................................................. 50

Forms .................................................................................................................................. 50 IIT Forms .................................................................................................................. 50 Mailing Addresses .................................................................................................... 50 Substitute Forms Must Be Approved ....................................................................... 51

Tax Refund and Payment Information ................................................................................ 51 State Tax Returns Claiming Refunds ....................................................................... 51 State Tax Returns with Tax Due............................................................................... 51 City of Detroit Tax Returns Claiming Refunds ........................................................ 52 City of Detroit Tax Returns with Tax Due ............................................................... 52

Post-Filing Information ....................................................................................................... 53 Mailing Addresses .................................................................................................... 53 Amended Michigan Income Tax Return (Schedule AMD)...................................... 54

Summary of Changes for 2023............................................................................................ 55 Phase-in Deductions under PA 4 for Tax Year 2023 ............................................... 56

Summary of Changes for Prior Years.................................................................................. 56 Filing Requirements ............................................................................................................ 57

Filing an MI-1040 Return......................................................................................... 57 Factors to Determine Domicile................................................................................. 57 Nonresident Aliens ................................................................................................... 57 Taxability of Income Derived Within Indian Country ............................................. 58 Estimated Income Tax .............................................................................................. 59 E-Payments ............................................................................................................... 60 Seafarers, Farmers, and Commercial Fishermen ...................................................... 60 Exemptions .......................................................................................................................... 61 Definitions of Michigan Special Exemptions........................................................... 61 Qualified Disabled Veteran Exemption.................................................................... 61 Part-Year and Nonresident ....................................................................................... 61 Claimed as a Dependent ........................................................................................... 62 Michigan Income Tax Treatment of Child's Unearned Income.......................................... 62 Additions/Deductions .......................................................................................................... 62 Eliminating Income and Expenses of Producing Oil and Gas.................................. 62 Renaissance Zones.................................................................................................... 62 Retirement and Pension Benefits.............................................................................. 63 Employer Plans......................................................................................................... 64 Individual Plans ........................................................................................................ 64 Pension Limitations Based on Date of Birth ............................................................ 66 Pension Limitations by Year of Birth....................................................................... 66 Phase-in Percentage Pension Limitations for Tax Year 2023 .................................. 67 Income Tax for Retirement Benefits by Year of Birth

Effective for Tax Year 2023.................................................................................. 68

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Page Phase-in Subtraction under PA 4 for Retirement Benefits

Effective for Tax Year 2023.................................................................................. 70 Unlimited Public Pension Subtraction...................................................................... 70 Private Pensions........................................................................................................ 70 Railroad Pension Benefits ........................................................................................ 71 Pension Subtraction Examples ................................................................................. 71 Individual Retirement Accounts (IRAs)................................................................... 72 2023 Pension Subtraction Table for Retirees Born Before 1946.............................. 72 1099-R Distributions from Pensions, Annuities, Retirement or Profit-Sharing

Plans, IRAs, Insurance Contracts, etc., Distribution Codes .................................. 73 Deferred Compensation ....................................................................................................... 74 Interest, Dividends, and Capital Gains Deduction for Senior Citizens Born

Before 1946 .............................................................................................................. 74 529 Education Plans ............................................................................................................ 75

Michigan Education Savings Program (MESP) ....................................................... 75 Michigan Education Trust (MET) ............................................................................ 75 Coverdell Educational Savings Account ................................................................. 75 Michigan Achieving a Better Life Experience Program (MiABLE)........................ 76 Nonresidents' Taxable Income ............................................................................................ 77 Withholding for Nonresidents .................................................................................. 77 Flow-Through Entity Distribution of Income and Losses ................................................... 78 Business, Rental, and Royalty Activity Worksheet.................................................. 79 Composite IIT Return for Nonresident Partners/Shareholders/Members................. 79 Flow-Through Entity (FTE) Tax for Entities that Elect to Pay ................................ 80 Apportionment of Income from Flow-Through Entities Under the Unitary Business Principle............................................................................................................. 80 Single Entity Apportionment.................................................................................... 80 Combined Multiple Entity Apportionment............................................................... 81 Adjustments of Capital Gains and Losses .......................................................................... 81 Net Operating Loss (NOL) .................................................................................................. 82 Gambling Income ................................................................................................................ 83 Military Pay ......................................................................................................................... 84 Principal Residence Exemption........................................................................................... 85 Principal Residence Exemption Records Review..................................................... 85 Nonrefundable Credits......................................................................................................... 86 Credit for Income Tax Imposed by Qualified Government

Units Outside Michigan...................................................................................... 86 Historic Preservation Income Tax Credit ................................................................. 86 Refundable Credits .............................................................................................................. 87 Homestead Property Tax Credit (HPTC) ................................................................. 87 Senior Credit Reduction ........................................................................................... 88 Homestead Property Tax Credit Phase Out .............................................................. 88 Special Situations ..................................................................................................... 90 Agricultural Gross Receipts...................................................................................... 91 Farmland Preservation Tax Credit............................................................................ 98 Tips to Expedite Processing ..................................................................................... 99 Sale of Land.............................................................................................................. 104 Reinstatement of a Development Rights Agreement................................................ 104 Farmland Preservation Tax Credit When Land Is Inherited..................................... 104 Taxable Portion of Farmland Preservation Tax Credit............................................. 104 Farmland Taxes Eligibility Chart ............................................................................. 106

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