New Developments for Tax Year 2021

 

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 2020 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 2022. 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
  • A valid MasterCard or VISA debit card

Make a Collections Payment


IRS Refund Delays Possible in 2022

  • Possible Refund Delay for Some Early Filers:
    • The PATH Act mandates that the IRS cannot issue a refund on tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit prior to mid-February. The additional time helps the IRS stop fraudulent refunds from being issued and 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 2021

  • Exemption allowances and the tax rate:
     
    • $4,900 for personal and dependent exemptions
    • $2,800 for special exemptions
    • $400 for qualified disabled veterans
    • $4,900 for number of certificates of stillbirth from MDHHS
    • 4.25% tax rate
       
  • Schedule 1 Additions and Subtractions:
     
    • Line 21: A taxpayer may be eligible to deduct wagering losses claimed on their federal return as an itemized deduction. If you elected to itemize deductions on your federal return this tax year (you did not take the standard deduction) and deducted wagering losses, you may be eligible to deduct wagering losses here. Residents: report the amount of wagering losses you deducted on U.S. Form 1040 Schedule A. Nonresidents: report the amount of wagering losses you deducted on U.S. Form 1040 Schedule A, but only those wagering losses attributable to wagering transactions placed at or through a casino or race track located in Michigan. Further, those losses are limited to the amount of wagering gains from wagering transactions placed at or through a casino or race track located in Michigan.
       
    • Line 24: Tier 3 Michigan Standard Deduction. Taxpayers who were born during the period January 1, 1953 through January 1, 1955, and reached the age of 67 on or before December 31, 2021, may be eligible for a Tier 3 Michigan Standard Deduction. This deduction is up to $20,000 for a return filed as single or married filing separately, or up to $40,000 for a married filing jointly return. Exemption(s) claimed on MI-1040, lines 9a and 9d, taxable Social Security benefits, military compensation (including retirement benefits), Michigan National Guard retirement benefits and railroad retirement benefits included in AGI may reduce the amount eligible to be claimed on this line. To determine your deduction, complete Worksheet 2.  

      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 (or the unremarried surviving spouse of a decedent born prior to 1946 who also died after reaching the age of 65) may subtract dividend, interest and capital gains included in AGI. This subtraction is limited to $12,127 for taxpayers filing single or married filing separately or $24,254 for joint filers, less any deduction for retirement benefits. (See page 16 in the MI-1040 Instruction Booklet)
              
      Dividend/Interest/Capital Gains Deduction Estimator

 

  • Pension Schedule (Form 4884):
     
    • Line 7D - Check the box if your deceased spouse was born after 1952, was retired as of January 1, 2013, and received retirement benefits from SSA exempt employment. 
       
    • Line 7E -  Check the box if you are a surviving spouse who meets the necessary conditions (see instructions) and are electing to claim the retirement and pension benefits subtraction on Form 4884, based on the year of birth of your older deceased spouse.
       
    • Who may Claim a Pension Subtraction?
       
      • TIER 1 
         
        Taxpayers born before 1946 may subtract qualified private pensions up to $54,404 for single or married filing separately filers and $108,808 for joint filers.
         
      • TIER 2

        Taxpayers born January 1, 1946 through December 31, 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 Tier 2 Michigan Standard Deduction on Schedule 1, line 23.

Taxpayers who receive retirement benefits from employment with a governmental agency exempt from Social Security may deduct up to $35,000 against all income for a single filer and $55,000 for joint filers. If both spouses on a joint return receive Social Security exempt retirement benefits, a standard deduction of $70,000 is allowed.

Surviving spouses who were born after 1945 and have reached the age of 67, have not remarried, and claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died, may elect to the take the larger of the retirement and pension benefits deduction based on the older deceased spouse's year of birth subject to the limits available for a single filer  or the survivor's Michigan Standard Deduction.

  • TIER 3

Taxpayers born January 1, 1953 through January 1, 1955 should not file Form 4884. Instead, taxpayers may be eligible for a Tier 3 Michigan Standard Deduction. This deduction is up to $20,000 for a return filed as single or married filing separately, or up to $40,000 for a married filing jointly return. Exemption(s) claimed on MI-1040, lines 9a and 9d, taxable Social Security benefits, military compensation (including retirement benefits), Michigan National Guard retirement benefits and railroad retirement benefits included in AGI may reduce the amount eligible to be claimed on this line. To determine your Tier 3 Michigan Standard Deduction on Schedule 1, line 24, complete Worksheet 2 in the MI-1040 booklet.

Surviving spouses who were born after 1945 and have reached the age of 67, have not remarried, and claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died, may elect to the take the retirement and pension benefits deduction based on the older deceased spouse's year of birth subject to the limits available for a single filer or the survivor's Michigan Standard Deduction.

Taxpayers born after January 1, 1955 but before January 2, 1960 who have reached age 62 and receive retirement benefits from employment with a governmental agency exempt from Social Security may deduct up to $15,000 in qualifying  retirement and pension benefits. If both spouses on a joint return receive Social Security exempt retirement benefits, the maximum deduction increases to $30,000. See Form 4884, line 18 instructions for more information.

Taxpayers born after January 1, 1955 who receive retirement benefits from a governmental agency exempt from Social Security and were retired as of January 1, 2013 may deduct up to $35,000 in qualifying pension benefits if single or married filing separately or $55,000 if married filing jointly. If both spouses on a joint return qualify, the maximum deduction increases to $70,000.

All other taxpayers born after  January 1, 1955, all retirement and pension benefits are taxable and are not entitled to a pension subtraction.
 

  • Surviving spouse

If a surviving spouse claimed a subtraction for retirement and pension benefits on a return jointly filed with the decedent in the year they died and the surviving spouse has not remarried, then the surviving spouse may claim the retirement and pension benefits subtraction that would have applied based on the year of birth of the older of the surviving spouse or the deceased spouse. For more information, see instructions

 For more information, see MI-1040 Instruction Booklet

 Pension Deduction Estimator

 

  • Homestead Property Tax Credit
     
    • Line 9 - Taxable Value $136,600
       
    • Line 33 - Total Household Resources $60,600
       
    • The homestead property tax credit phase-out begins when your total household resources exceed $51,600.

 

  • Home Heating Credit (MI-1040CR-7):
  • Line 42 - Maximum heating costs $3,047
     
  • Line 47 - Home Heating Credit. Multiply line 46 by 100%

Note: The last day to file a 2021 Home Heating Credit is September 30, 2022. No filing extensions
           are allowed.

     

           TABLE A: 2021 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

$497

$14,186

2

$672

$19,186

3

$846

$24,157

4

$1,021

$29,156

5

$1,196

$34,157

6

$1,371

$39,157

 

+ $175 for each
exemption over 6

+ $5,000 for each
exemption over 6

 


TABLE B: 2021 Home Heating Credit (MI-1040CR-7) Alternate Credit Computation

Exemptions and Maximum Income for the Alternate Credit Computation

EXEMPTIONS

MAXIMUM INCOME

0-1

$15,237

2

$20,504

3

$25,775

4

$27,700

 

 

Additional Information

The Substitute Form 1099-G you receive in 2022 shows the amount of your 2020 refund and any prior year refunds issued to you in 2021.

Review all refunds issued to you and the tax returns filed during the year in question.

Add to the refund amount, any of the following which are included on the Substitute Form 1099-G:

  • Amount credited forward to 2021 estimated tax
  • Prior year refunds issued in 2021
  • Refund amounts intercepted by the Michigan Department of Treasury to apply to back tax assessments, State Agency Collections (e.g. probation or supervision fees issued by the Department of Corrections) or other third party garnishments
  • Any portion of a refund designated on your return to pay Use tax
  • Amount contributed on the Michigan Voluntary Contribution Schedule

Subtract refundable credits which are not included on the Substitute Form 1099-G:

  • Homestead Property Tax and Farmland Preservation Tax Credits
  • Michigan Earned Income Tax Credit
  • Michigan Historic Preservation Tax Credit

This figure should match the amount on your Substitute Form 1099-G.
 

  • Direct Debit
     
    • Taxpayers may elect to use direct debit when e-filing their 2019, 2020 or 2021 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
     
  • 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 Rights & 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
 

  • Property Tax Credits / Refunds
     
    • Michigan homestead property tax credit and State refunds from Michigan Department of Treasury received in 2021 may be taxable on your 2021 U.S. 1040. If you have questions about the taxability (for federal tax purposes) of your refunds, call the IRS at 800-829-1040.

 

  • 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.

Note: Failure to provide a complete Social Security number on Form MI-1040ES will result in processing delays.
 

  • 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 due date of the original return. For example: You must file a 2017 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, 2022.