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Tag Archive | "taxpayers"

New study analyzes impact of Proposal 1 on taxpayers


 

The Mackinac Center for Public Policy published a new analysis of Proposal 1, which voters will be asked to approve or reject on May 5. The proposal increases taxes by $2 billion and aims to dedicate most of that revenue for future road construction and maintenance. In addition to reviewing the proposed constitutional and legislative changes, this new study estimates how Proposal 1 would impact the typical Michigan household.

James Hohman, author of the study and assistant director of fiscal policy at the Mackinac Center, used data from the U.S. Census Bureau, U.S. Department of Transportation and the U.S. Bureau of Labor Statistics to estimate that Proposal 1 would increase the tax burden of the typical Michigan household by about $500 in 2016.

“These estimates rely on assumptions about the average price of gasoline and other factors, but they’re about as close as one can get to figuring out about how much taxpayers would pay if voters approve of this plan to increase funding for roads,” Hohman said.

Proposal 1 would make four changes to the Michigan Constitution: increasing the allowable sales tax rate to 7 percent, exempting fuel purchases from sales and use taxes, prohibiting public universities from receiving revenue from the School Aid Fund and earmarking a portion of use tax revenue for the School Aid Fund.

These changes are “tie-barred” with eight legislative bills that will go into effect if voters approve of Proposal 1. These laws would hike the sales and use tax to 7 percent, create a new wholesale fuel tax of 41.7 cents per gallon and earmark this revenue for roads, increase the state’s earned income tax credit, boost spending on one public school program and create new rules pertaining to road construction projects for the Michigan Department of Transportation.

Regarding the proposed wholesale tax on fuel, it is likely that prices at the pump for gasoline consumers will be higher if Proposal 1 passes. Based on data from the U.S. Energy Information Administration, the average national gasoline price in 2015 will be $2.39. At this rate, consumers would pay about 10 cents more per gallon in taxes at the pump.

“The difference between the proposed gas tax and the current one depends a lot on the price of gasoline. But only when gasoline prices exceed $4.20 per gallon will consumers start to pay less at the pump under Proposal 1,” Hohman added.

The analysis found that the proposed new wholesale fuel tax will increase at a rate that will outpace inflation. The mechanics of the formula prescribed in the law to adjust the tax rate based on inflation ensures that the rate will grow faster than inflation.

“The way the fuel tax formula is designed, taxpayers can expect to see fuel taxation rates rise faster than inflation,” Hohman said.

Even though the earned income tax credit would be increased under Proposal 1 (from 6 percent of the federal EITC amount to 20 percent), low-income households in Michigan may not experience much of a tax benefit overall.

“The average EITC recipient’s tax burden will likely be reduced slightly if Proposal 1 passes, but there will be EITC recipients whose overall tax burden will still rise,” said Hohman.

The full study can be found online here: www.mackinac.org/21128

The Mackinac Center for Public Policy is a nonpartisan research and educational institute dedicated to improving the quality of life for all Michigan citizens by promoting sound solutions to state and local policy questions. The Mackinac Center assists policy makers, scholars, business people, the media and the public by providing objective analysis of Michigan issues.

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Personal property tax change


A change in the personal property tax law for 2014 could give some small business owners some relief.

Effective December 31, 2013, commercial and industrial personal property with a combined true cash value of less than $80,000, is eligible for an exemption—but the exemption must be filed by February 10.

True cash value is the market value of all personal property owned by, leased by or in the possession of the owner or related entity, within a local tax-collecting unit.

To qualify for the exemption, the taxpayer must file the “eligible personal property exemption affidavit” with the local city or township. If it is not filed on time, the taxpayer will not receive the exemption. The affidavit form is available online at Michigan.gov and on the City of Cedar Springs website.

Taxpayers who qualify by filing on time, are not required to also file a personal property statement. But they still must maintain books and records relating to the description, date of purchase or acquisition, purchase or lease price, and value of all the industrial and commercial property for four years. They must make these records available to the local assessor, county equalization department, and the Department of Treasury upon request.

If the assessor believes that the property is not eligible, the assessor may deny the claim and notify the taxpayer of the reasons for the denial. A taxpayer may then appeal the denial before the Board of Review. Failure to file an exemption on time does not qualify as a denial and cannot be appealed.

Anyone who fraudulently claims an exemption for personal property would be guilty of a misdemeanor punishable by imprisonment of 30 days to 6 months and/or a fine of $500 to $2,500.

Taxpayers not eligible for the exemption must still file a personal property statement by February 20. Failure to file either a personal property statement or an exemption affidavit will result in an estimated assessment.

For more info, go to Michigan.gov/treasury.

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Need more time to pay your taxes?


Taxpayers who owe taxes may be relieved to know that there are some options for those who owe and can’t afford to pay the full amount right away.

Here are the top 10 things the IRS wants you to know if you need more time to pay your taxes.

Taxpayers who are unable to pay all taxes due are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less.

Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, temporary delay or an Offer in Compromise.

If you cannot pay the full amount, taxpayers should immediately call the number or write to the address on the bill they receive.

You may want to consider financing the full payment of your tax liability through a loan. The interest rate and fees charged by a bank or credit card company are usually lower than interest and penalties imposed by the Internal Revenue Code.

If you cannot pay in full immediately, you may qualify for a short amount of additional time, up to 120 days, to pay in full. No fee is charged for this type of payment arrangement and this option may minimize the amount of penalties and interest you incur.

You may also want to consider an installment agreement. This arrangement allows you to make monthly payments after a one-time fee of $105 is paid. If you choose to pay through a Direct Debit from your bank account, the fee is reduced to $52. Lower-income taxpayers may qualify for a reduced fee of $43.

To apply for an installment agreement you can use the Online Payment Agreement application available on the IRS website; file a Form 9465, Installment Agreement Request; or call the IRS at the telephone number shown on your bill.

In some cases, a taxpayer may qualify for an offer in compromise, an agreement between the taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

Even if you set up an installment agreement, the IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make the final payment.

It is important to respond to an IRS notice. If you do not pay your tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action.

More information on the collection process is available at http://www.irs.gov.

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Don’t overlook these tax breaks on your 2010 return


woman with magnify glass(ARA) – Every year, taxpayers miss out on hundreds or thousands of dollars in tax breaks simply because they don’t know the benefits exist.
* If you paid for child care in 2010, you may be eligible for the Child and Dependent Care Credit. Day care, pre-kindergarten, before-school and after-school programs and summer day camp for children 13 or younger qualify. The care must have been provided so that you, and your spouse, if filing jointly, could work or look for work (exceptions apply for full-time students and the disabled).
The credit amount varies based on filing status and adjusted gross income, but the maximum benefit is 35 percent of expenses for joint filers with an adjusted gross income of $15,000. Eligible expenses are reduced by dependent care benefits provided by your employer that you deduct or exclude from your income. Payment for care cannot be paid to a spouse, a dependent on your return, or to a child who will not be age 19 or older by the end of the year even if he or she is not your dependent; thus, care provider(s) must be identified on your return.
* 2010 is the last year to claim the Nonbusiness Energy Credit, worth up to 30 percent of the costs for many energy-efficient home improvements. Up to $1,500 for 2009 and 2010 combined can be claimed, but only for the year during which the improvements were made. Other green improvements like solar hot water property, geothermal heat pumps and wind energy property may qualify for the Residential Energy Efficient Property Credit.
* If you travel in order to provide services at charitable events, you may be able to take a miscellaneous deduction. Deductible expenses include transportation costs, out-of-pocket expenses for your car, taxi fares or other costs of transportation between the airport or station, and your hotel, lodging and meals. The trip should include little to no personal recreation or vacation. Be sure to keep receipts and detailed documentation.
* Be rewarded for contributing to your employer-sponsored retirement plan or an individual retirement arrangement (IRA). The Retirement Savings Contributions Credit is worth up to $1,000 for taxpayers born before Jan. 2, 1992 ($2,000 for joint filers). The non-refundable credit is a percentage of the qualifying contribution amount minus distribution amounts, with the highest rates given to lower incomes.
* If you spent money looking for a job in the same field during 2010, you may qualify for a miscellaneous deduction. Employment agency fees, resume printing and postage costs and travel to and from the area (if the travel was primarily to look for a new job) are eligible. You aren’t eligible if you’re looking for your first job or there was substantial time between the end of your last job and the time you looked for a new one.
Details about these and other 2010 tax breaks can be found at www.irs.gov.

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