City Tax Law Training Tax Year 2017 City

City Tax Law Training Tax Year 2017

City Tax Returns • 22 Michigan cities have city income tax • Common ones seen at the West Michigan sites include but are not limited to, Muskegon Heights, Grand Rapids, and Walker • Detroit has it’s own set of city forms but every other city uses the “Michigan Cities Common Form” to report city taxes

Taxable Michigan Cities Accepting the 2017 Common Form Michigan Cities Not Accepting the 2017 Common Form Detroit MI-1040 CF Hudson Port Huron 3

What is the rate of tax? • There are 18 cities that charge the standard rate: 1% • Residents that live in a taxing city will owe 1% of their total earnings to the city they live in. • If a person works in a city that has taxes, . 5% of the total earnings made in that city will be taxed.

The exceptions to the standard rate are: City Residents Nonresidents Detroit 2. 5% 1. 25% Grand Rapids 1. 3% 0. 65% Highland Park 2% 1% Saginaw 1. 5% 0. 75%

INCOME SUBJECT TO CITY INCOME TAX Residents: All salaries, wages, bonuses, commissions and other compensation; net profits from business or profession; net rental income; capital gains less capital losses; interest and dividends; income from estates and trusts; and other income. Nonresidents: Salaries, wages, bonuses, commissions and other compensation for services rendered or work performed in the city; net rental income from property located in the city; net profits from a business, profession or other activity to the extent that it is from work done, services rendered or activity conducted in the city; capital gains less capital losses from the sale of real or tangible personal property located in the city. Part-Year Residence: Prorated share of income stated above. A tax calculation worksheet is required to show income that is excluded, taxed as a resident, and taxed as a nonresident. Resident 6

Reporting City Tax Withheld • The city tax withheld will show up on the W 2 next to the state information. • It is vital that the spelling of the city is correct in the tax software to carry the city information to the correct form off the federal return. Correct city names will be available at the tax site. • Note: Not all employers will withhold local taxes!

Example

Common Form Software View • Even if there is no with holdings on the W 2, there is still tax owed. Many times, employers will not do city withholdings so it is common that there is tax due

Filing Status and Exemption • Filing status options are the same as the state • Exemptions and filing status carry over

What income is table for city taxes? • The taxable income will flow directly from Tax software. The starting points are the line items of income (lines 7 through 21 of federal Form 1040 or related lines of Form 1040 EZ or Form 1040 A) with where applicable, attached schedules and worksheets detailing the computation of exclusions or adjustments necessary to properly report the city’s taxable income. • Unemployment, workman’s comp. , and SSI typically are not taxable.

Attachments

Extra Items • The city portion of the return is typically very simple. It does get a little tricky if someone has moved around. • Many people find that their employer has not withheld city income taxes and people end up owing money for the city taxes. • Attach the W 2 s to the city tax forms that are being mailed to the city. • Go through a few examples with a program coordinator to get familiar with forms. Confirm mailing addresses. • Filing deadlines are typically later than the Federal & State due dates

Top Ten Mistakes Filing a Tax Return 1. Failure to attach schedules and statements. 2. Non-residents: Taking deductions and credits available only to residents. 3. Residents: Failure to file estimated payments especially when working outside the City and the employer does not withhold tax. 4. Residents: Failure to report all wages earned. 5. Non-resident: Failure to accurately calculate wages earned in the City when working in and out of the City. 6. Failure to report address change to the City Income Tax office /having incorrect address on tax return. 7. Failure to accurately report estimated payments either over or under. 8. Failure to a file return for the year taxpayer moves in or out of the City. 9. Failure to allocate taxes paid when allocating income for move in/move out year. 10. Failure to pay the amount due on-time.

The End Thanks for watching! Questions? Contact Carl Lewis Tax Program Coordinator 231 -722 -7871, ext. 1071 clewis@goodwillwm. org