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Archive | Tax Time

Income tax deadline in a week

LANSING, Mich.—The Michigan Department of Treasury (Treasury) is reminding taxpayers that state individual income tax returns are due next week.

State individual income tax returns must be submitted electronically or sent through the U.S. Postal Service before midnight on Monday, May 17. For the convenience of taxpayers, the state’s individual income tax deadline is the same date set by the Internal Revenue Service.

“There is still time to file a return or make a payment,” State Treasurer Rachael Eubanks said. “Taxpayers who owe taxes should be sure to make their payments on time to avoid penalties and interest. I encourage those taxpayers who may be owed a refund to not wait to file their returns. Every dollar helps right now as we navigate these extraordinary times.”

Choosing electronic filing and direct deposit is convenient, safe and secure. Last year, more than 4.4 million Michigan taxpayers e-filed, which is 86 percent of state income tax filers. For more information about e-filing, go to www.mifastfile.org.

Individuals who e-file typically receive their refunds approximately two weeks after receiving confirmation that the tax return was accepted by the state of Michigan.

Taxpayers can pay their outstanding tax balance by eCheck, debit or credit card.

Individual taxpayers who need additional time to file beyond the May 17 deadline can request an extension to Oct. 15, 2021. Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by May 17, 2021, to avoid additional interest and penalties.

A Taxpayer Notice issued by the state Treasury Department provides details about the individual income tax deadline change.

Questions?

Taxpayers with questions about their state income taxes are encouraged to use Treasury eServices. The online platform enables taxpayers to ask state income tax-related questions when convenient and avoids the extended wait times for calls this time of year.

To get started with Treasury eServices, go to www.michigan.gov/incometax and click on “eServices Individual Income Tax.”

To learn more about the state Treasury Department, go to www.Michigan.gov/Treasury or follow @MiTreasuryon Twitter.

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An offer in compromise may help some taxpayers settle their tax bill

Individual taxpayers and business owners can use the IRS’s recently updated Offer in Compromise Booklet to learn how an offer in compromise works and decide if it could help them resolve their tax debt.

An offer in compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. An offer in compromise is an option when a taxpayer can’t pay their full tax liability. It is also an option when paying the entire tax bill would cause the taxpayer a financial hardship. The goal is a compromise that suits the best interest of both the taxpayer and the agency.

When reviewing applications, the IRS considers the taxpayer’s unique set of facts and any special circumstances affecting the taxpayer’s ability to pay as well as the taxpayer’s:

  • Income
  • Expenses
  • Asset equity

The booklet covers everything a taxpayer needs to know about submitting an offer in compromise, including:

  • Who is eligible to submit an offer
  • How much it costs to apply
  • How the application process works

The booklet also includes the forms that taxpayers must complete as part of the Offer in Compromise process. The current application fee is $205. However, taxpayers who meet the definition of a low-income taxpayer don’t have to pay this fee.

More information

Offer In Compromise Pre-Qualifier tool: https://irs.treasury.gov/oic_pre_qualifier/

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IRS reminds people to prepare for natural disasters

WASHINGTON–The Internal Revenue Service reminds everyone that May includes National Hurricane Preparedness Week and is also National Wildfire Awareness Month. Now is a good time to create or review emergency preparedness plans for surviving natural disasters.

In the last year, the Federal Emergency Management Agency (FEMA) declared major disasters following hurricanes, tropical storms, tornados, severe storms, flooding, wildfires and an earthquake. Individuals, organizations and businesses should take time now to make or update their emergency plans.

Secure key documents and make copies

Taxpayers should place original documents such as tax returns, birth certificates, deeds, titles and insurance policies inside waterproof containers in a secure space. Duplicates of these documents should be kept with a trusted person outside the area of the taxpayer. Scanning them for backup storage on electronic media such as a flash drive is another option that provides security and portability.

Document valuables and equipment

Current photos or videos of a home or business’s contents can help support claims for insurance or tax benefits after a disaster. All property, especially expensive and high value items, should be recorded. The IRS disaster-loss workbooks in Publication 584 can help individuals and businesses compile lists of 

Employers should check fiduciary bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. The IRS reminds employers to carefully choose their payroll service providers.

Rebuilding documents

Reconstructing records after a disaster may be required for tax purposes, getting federal assistance or insurance reimbursement. Those who have lost some or all their records during a disaster can visit IRS’s Reconstructing Records webpage as one of their first steps.

IRS stands ready

After FEMA issues a disaster declaration, the IRS may postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. There is no need to call the IRS to request this relief. The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. Those impacted by a disaster with tax-related questions can contact the IRS at 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Taxpayers who do not reside in a covered disaster area, but suffered impact from a disaster should call 866-562-5227 to find out if they qualify for disaster tax relief and to discuss other available options.

Find complete disaster assistance and emergency relief details for both individuals and businesses on our Around the Nation webpage on IRS.gov. The FEMA Prepare for Disasters web page includes information to Build a Kit of emergency supplies.

Related items:

• Publication 2194, Disaster Resource Guide for Individuals and Businesses

• Publication 583, Starting a Business and Keeping Records

• FS-2017-11, Reconstructing Records After a Natural Disaster or Casualty Loss

• Small Business Administration

• Disasterassistance.gov

• Ready.gov

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Taxpayers should consider filing an amended return for unemployment benefit tax relief

Some e-filer providers will not charge a fee for amended returns

LANSING, Mich. Taxpayers who filed their individual income tax returns and collected unemployment benefits in 2020 should consider filing an amended return if they haven’t yet received their entitled tax relief, according to the Michigan Department of Treasury.

The federal American Rescue Plan Act excludes unemployment benefits up to $10,200 from income for tax year 2020 for those within certain income brackets, providing tax relief on both federal and state income taxes. Taxpayers who may have anticipated owing taxes may now be entitled to a refund or a lesser payment.

“We have been waiting for the Internal Revenue Service to provide us guidance so we can determine the best way to provide taxpayers tax relief without requiring additional paperwork,” State Treasurer Rachael Eubanks said. “However, we still do not have clear guidance from the IRS. We don’t want to wait any longer to get refunds in taxpayers’ hands during this extraordinary time. That’s why we’re encouraging individuals to file an amended return.”

On April 1, the state Treasury Department previously asked taxpayers to wait to file an amended return until further guidance was provided by the IRS.

There is no need for taxpayers to file an amended federal return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

Taxpayers who e-filed their original return should e-file their amended return. Software products have been programmed to accommodate this change.

Some software providers will not charge a fee if the original return was e-filed through their service.

Individuals who desire to file a paper return should do so carefully to avoid mistakes. This includes checking the “Amended Return” box on Form MI-1040 and outlining the reason for the amended return on the Schedule AMD.

Details about properly filing an amended paper return can be found on www.Michigan.gov/IIT.

Further guidance can be found in a Notice: Update to April 1, 2021 Notice Regarding the Treatment of Unemployment Compensation for Tax Year 2020 provided by the state Treasury Department.

Questions?

Taxpayers with questions about their state income taxes are encouraged to use Treasury eServices. The online platform enables taxpayers to ask state income tax-related questions when convenient and avoids the extended wait times for calls this time of year.

To get started with Treasury eServices, go to www.michigan.gov/incometax and click on “eServices Individual Income Tax.”

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Taxpayers shouldn’t believe these myths about federal tax refunds

Now that many taxpayers have filed their federal tax returns, they’re eager for details about their refund. When it comes to refunds, there are several common myths that can mislead taxpayers.

Myth #1: Getting a refund this year means there’s no need to adjust withholding for 2021.

To help avoid a surprise next year, taxpayers should make changes now to prepare for next year. One way to do this is to adjust their tax withholding with their employer. This is easy to do using the Tax Withholding Estimator. This tool can help taxpayers determine if their employer is withholding the right amount. This is especially important for anyone who got an unexpected result from filing their tax return this year. Also, taxpayers who experience a life event like marriage, divorce, birth of a child, an adoption or are no longer able to claim a person as a dependent are encouraged to check their withholding.

Myth #2: Calling the IRS or a tax professional will provide a better refund date.

Many people think talking to the IRS or their tax professional is the best way to find out when they will get their refund. The best way to check the status of a refund is online through the Where’s My Refund? tool or the IRS2Go app.

Taxpayers can call the automated refund hotline at 800-829-1954. This hotline has the same information as Where’s My Refund? and IRS telephone assistors. There is no need to call the IRS unless Where’s My Refund? says to do so.

Myth #3: Ordering a tax transcript is a secret way to get a refund date.

Doing so will not help taxpayers find out when they will get their refund. Where’s My Refund? tells the taxpayer their tax return has been received and if the IRS has approved or sent the refund.

Myth #4: Where’s My Refund? must be wrong because there’s no deposit date yet.

Updates to Where’s My Refund? ‎on both IRS.gov and the IRS2Go mobile app are made once a day. These updates usually occur overnight. Even though the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer. If the IRS needs more information to process a tax return, the agency will contact the taxpayer by mail. Taxpayers should also consider the time it takes for the banks to post the refund to the taxpayer’s account. People waiting for a refund in the mail should plan for the time it takes a check to arrive.

Myth #5: Where’s My Refund? must be wrong because a refund amount is less than expected.

There are several factors that could cause a tax refund to be larger or smaller than expected. Situations that could decrease a refund include:

The taxpayer made math errors or mistakes

The taxpayer owes federal taxes for a prior year

The taxpayer owes state taxes, child support, student loans or other delinquent federal non-tax obligations

The IRS holds a portion of the refund while it reviews an item claimed on the return

The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury’s Bureau of the Fiscal Service if their refund was reduced to offset certain financial obligations.

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Dos and don’ts for taxpayers who get a letter or notice from the IRS

The IRS mails letters or notices to taxpayers for a variety of reasons including if:

• They have a balance due.

• They are due a larger or smaller refund.

• The agency has a question about their tax return.

• They need to verify identity.

• The agency needs additional information.

• The agency changed their tax return.

Here are some do’s and don’ts for taxpayers who receive one:

Don’t ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. The notice or letter will explain the reason for the contact and gives instructions on what to do.

Don’t panic. The IRS and its authorized private collection agencies generally contact taxpayers by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.

Do read the notice. If the IRS changed the tax return, the taxpayer should compare the information provided in the notice or letter with the information in their original return. In general, there is no need to contact the IRS if the taxpayer agrees with the notice.

Do respond timely. If the notice or letter requires a response by a specific date, taxpayers should reply in a timely manner to:

  ° minimize additional interest and penalty charges.

  ° preserve their appeal rights if they don’t agree.

Do pay amount due. Taxpayers should pay as much as they can, even if they can’t pay the full amount. People can pay online or apply for an Online Payment Agreement or Offer in Compromise. The agency offers several payment options.

Do keep a copy of the notice or letter. It’s important to keep a copy of all notices or letters with other tax records. Taxpayers may need these documents later.

Do remember there is usually no need to call the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling. Typically, taxpayers only need to contact the agency if they don’t agree with the information, if the IRS request additional information, or if the taxpayer has a balance due. Taxpayers can also write to the agency at the address on the notice or letter. If taxpayers write, they should allow at least 30 days for a response.

Do avoid scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure if they owe money to the IRS can view their tax account information on IRS.gov.

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Pay delinquent property taxes online

Those who have delinquent property taxes in Kent County can now pay them right online.

Kent County Treasurer Peter MacGregor has launched a new online platform to provide residents with greater access to contactless services. The free mobile app– myKentCounty – will allow individuals to pay their delinquent taxes online. 

“Over the past year we have seen how important it is to give our residents the option of contactless services,” said Kent County Treasurer Peter MacGregor. “This new electronic service will allow residents to view and pay their delinquent taxes from the convenience of their home or business.” 

This new online tool was developed in partnership with PayIt, an innovative partner in digital government and payment solutions. To access this new service, residents should: 

  • Visit payments.mykentcounty.com or download the free myKentCounty app in the iPhone or Google Play (Android) app stores 
  • Create an account with PayIt 
  • Select Kent County Delinquent Property Tax 
  • View and pay your bills 
  • Print or digitally store your receipts. 

“We are excited to launch myKentCounty as it will greatly improve our payment system while simultaneously saving taxpayers time and potential penalties,” said MacGregor. “This is another important step in how my office will serve County residents and we will continue to work with PayIt to add future services to the platform.” 

Taxpayers can also pay their delinquent taxes by going to https://www.accesskent.com/Departments/Treasurer/ and selecting the Pay Delinquent Taxes button. Residents with questions may contact the Treasurer’s Office at (616) 632-7500 or kctreasurer@kentcountymi.gov.

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Here’s how people can pay their federal taxes

The May 17 deadline for individuals to file and pay their federal income tax is fast approaching. While paying taxes is not optional, people do have options when it comes to how they pay taxes. The IRS offers a variety of ways to pay taxes.

Some taxpayers must make quarterly estimated tax payments throughout the year. This includes sole proprietors, partners, and S corporation shareholders who expect to owe $1,000 or more when they file. Individuals who participate in the gig economy might also have to make estimated payments. The deadline to pay estimated taxes remains April 15, 2021.

Here are five ways for people who need to pay their taxes. They can:

  • Pay when they e-file using their bank account, at no charge, using electronic funds withdrawal.
  • Use IRS Direct Pay which allows taxpayers to pay electronically directly from their checking or savings account for free. They can choose to receive email notifications about their payments when they pay this way. Taxpayers should watch out for email schemes. IRS Direct Pay sends emails only to users who request the service.
  • Pay using a payment processor by credit card, debit card or digital wallet options. Taxpayers can make these payments online, by phone or through the IRS2Go app.
  • Make a cash payment at more than 60,000 participating retail locations nationwide. To pay with cash, visit IRS.gov and follow the instructions.
  • Pay over time by applying for an online payment agreement. Once the IRS accepts an agreement, the taxpayers can make their payment in monthly installments.

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Working families and individuals eligible for homestead property tax credit

Average tax credit was $669 for the 2019 tax year

LANSING, Mich.—Working families and individuals with household resources of $60,000 or less a year may be eligible for a Homestead Property Tax Credit, according to the Michigan Department of Treasury.

Michigan’s Homestead Property Tax Credit can help taxpayers if they are a qualified homeowner or renter and meet certain requirements. For most people, the tax credit is based on a comparison between property taxes and total household income, with homeowners paying property taxes directly and renters paying them indirectly with their rent.

“Homestead Property Tax Credits provide tax relief for Michigan’ working families and individuals,” said Deputy State Treasurer Glenn White, head of Treasury’s Revenue Services programs. “These tax credits can reduce tax owed and may provide a refund.”

For the 2019 tax year, more than 1.1 million (or 1,172,000) taxpayers claimed the Homestead Property Tax Credit, totaling more than $784.8 million with an average credit at $669.

Taxpayers may claim a Homestead Property Tax Credit if ALL the following apply:

* Your homestead is in Michigan.

* You were a resident of Michigan for at least six months during the year.

* You own or are contracted to pay rent and occupy a Michigan homestead on which property taxes were levied.

* If you own your home, your taxable value is $135,000 or less (unless unoccupied farmland).

* Your Total Household Resources are $60,000 or less

Taxpayers who are required to file a state income tax return should claim the Homestead Property Tax Credit with their return. Taxpayers may file a Homestead Property Tax Credit claim by itself.

Unemployment compensation—including the federal exclusion—is still included in a taxpayer’s Total Household Resources. While the federal American Rescue Plan Act reduced Adjusted Gross Income and state tax liabilities, it doesn’t reduce Total Household Resources.

To learn more about the Homestead Property Tax Credit and state income taxes, go to www.michigan.gov/incometax and click on “Credits and Exemptions” at the bottom of the page.

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IRS has refunds totaling $1.3 billion for people did not file in 2017

WASHINGTON—Unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 Form 1040 federal income tax return, according to the Internal Revenue Service.

“The IRS wants to help taxpayers who are due refunds but haven’t filed their 2017 tax returns yet,” said IRS Commissioner Chuck Rettig. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on May 17. We want to help people get these refunds, but they will need to quickly file a 2017 tax return.”

The IRS estimates the midpoint for the potential refunds for 2017 to be $865—that is, half of the refunds are more than $865 and half are less. In Michigan, they estimate 43,100 did not file, and are owed refunds totaling $43,189,300.

In cases where a federal income tax return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a tax refund. If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. For 2017 tax returns, the window closes May 17, 2021, for most taxpayers. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by that date.

The IRS reminds taxpayers seeking a 2017 tax refund that their checks may be held if they have not filed tax returns for 2018 and 2019. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2017. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2017, the credit was worth as much as $6,318. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2017 were:

  • $48,340 ($53,930 if married filing jointly) for those with three or more qualifying children;
  • $45,007 ($50,597 if married filing jointly) for people with two qualifying children;
  • $39,617 ($45,207 if married filing jointly) for those with one qualifying child, and;
  • $15,010 ($20,600 if married filing jointly) for people without qualifying children.

Current and prior year tax forms (such as the tax year 2017 Form 1040, 1040A and 1040EZ) and instructions are available on the IRS.gov Forms and Publications page or by calling toll-free 800-TAX-FORM (800-829-3676).

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2017, 2018 or 2019 should request copies from their employer, bank or other payer. Taxpayers who are unable to get missing forms from their employer or other payer can order a free wage and income transcript at IRS.gov using the Get Transcript online tool at https://www.irs.gov/individuals/get-transcript. Alternatively, they can file Form 4506-T to request a wage and income transcript. A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return.

First-time filers and EIP eligible

The IRS reminds first-time filers and those who usually don’t have a federal filing requirement that they must file a 2020 tax return to claim the Recovery Rebate Credit (RRC), if they were eligible but did not receive the first or second Economic Impact Payment (EIP), or received less than the full amounts. The IRS offers free options to prepare and file a return at How to File on IRS.gov. Taxpayers who received the full amounts of both EIPs cannot claim the RRC and should not include any information about the payments on their 2020 tax return.

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