Written by: Annette Clark, CPA

You may be eligible for a Michigan Unemployment Tax Credit.

To determine if you are eligible for the Michigan Unemployment Tax Credit you need to locate your “actual reserve” balance as of June 30, 2010 as shown on your 2011 Michigan Unemployment Annual Tax Rate Determination.   If this balance is positive you are eligible for the credit. 

Complete form UIA 1110 which is available at: http://www.michigan.gov/uia/  Just type in UIA 1110 2012 in the search field, choose the top item and scroll down to you get to the correct form.  All you need is your Unemployment Insurance Agency account number and Michigan wages as reported on your 2011 IRS Form 940 Schedule A.  Remove the bottom portion of the form and mail to the address at the top of the form. 

The bottom half of the form is not required for you to receive the credit, but for you to verify the amount the State credits your account for.  Once the form is processed by the State, a credit will show up on your quarterly preprinted UIA 1020 form.

If Robert F. Murray & Company prepares your quarterly payroll tax returns we will prepare this form for you if you are eligible. We ask that you provide us with the preprinted quarterly UIA 1020 forms when received so that we can utilize the credit when it becomes available.

If you have any questions or need assistance in the preparation of this form please let us know, we’d be happy to assist you.

Written by: Heather Graham, CPA, CVA

Changes to the Michigan Employment Security Act, Effective for 2012

On December 19, 2011 the State of Michigan made several changes to the Michigan Employment Security Act. 

• The State issued $3.323 billion in revenue bonds and retired the debt due to the federal government for funds used to pay Michigan unemployment benefits.  The bonds are scheduled for a 10 year repayment.
• The repayment of the debt to the federal government will remove the credit reduction tax from the Federal Unemployment Tax computation. (Previously this was expected to be 1.2% on the first $7,000 of each employee’s wages.)
• Michigan unemployment wage base has been increased from $9,000 per employee to $9,500 for 2012.  The $9,500 wage base will continue until the Unemployment Insurance Trust Fund reaches a positive balance of $2.5 billion.
• There is a new component to the Michigan Unemployment Tax Rate Determination this year.  It is called the Obligation Assessment (OA).  The OA will be applied to all contributing employers until the revenue bonds are repaid.  According to the Department of Licensing and Regulatory Affairs, “the OA is structured to incorporate your experience rate and a base assessment of $42 per employee for 2012, and is currently estimated to be $63 per employee for 2013 and beyond.”  At this time, we have not yet seen this “calculation”.

It will be very important that you provide your payroll preparer with a copy of your annual Tax Rate Determination.  It is expected that your new state unemployment rate will be significantly higher than last year.

The debt ceiling debate is something technical that very few people actually understand.  Did you know that the US has actually had three instances when it could have defaulted on its obligations?  This happened in 1790, 1933 and 1971.  It seems like lawmakers are using the debt limit to force the administration to accept significant spending cuts.  There is a terrific article in the Washington Post that explains this debate and sheds some light on a different view of the situation.

Click here to read the entire article.

Michigan lawmakers have proposed a state tax on healthcare claims that would help fund medical care for low-income residents, according to a Detroit News report.

The tax is expected to cost some insurers and employers millions of dollars a year and lead to higher insurance premiums to consumers. Manufacturers and hospitals have come into conflict over the proposed tax, as manufacturers say the tax would halt new hiring and reduce employee benefits and hospitals say they could lose workers if the tax is defeated and Medicaid funding is cut.

Michigan’s 2012 budget, signed by Gov. Rick Snyder on Tuesday, depends on the passage of a 1 percent claims tax to fund Medicaid, which provides healthcare coverage to approximately 1.9 million Michigan residents. The tax would replace a 6 percent use tax that health maintenance organizations currently pay. The current tax does not affect consumers.

The current 6 percent use tax has been endangered by the federal government’s pending decision to disallow its use for federal matching funds. The proposed tax would shift responsibility for paying $400 million towards Medicaid from 14 Medicaid health plans to every health insurer and self-funded employer plan, according to the report.

Read the Detroit News report on Michigan Medicaid.  By: Rachel Fields

To reflect the recent increase in gas prices, the IRS raised the standard mileage rates for the last six months of the year. The rate will increase to 55.5 cents per mile for business miles driven from 7/1/11 through 12/31/11, a 4.5 cent per mile increase from the rate in effect for the first six months of 2011 [see Rev. Proc. 2010-51 (2010-51 IRB 883) ].

 The rate for computing deductible medical or moving expenses will also increase by 4.5 cents per mile to 23.5 cents per mile, up from 19 cents per mile for the first six months of 2011. The rate for providing services for a charity is set by statute, and remains at 14 cents per mile.

photo credit: mbowlersr

On May 25, 2011, Governor Rick Snyder signed and eight-bill package in an effort to make Michigan more competitive economically as well as to bring fairness and simplicity to Michigan’s current tax structure.  These new laws become effective January 1, 2012. 

Snyder is quoted as saying, “The current tax system is riddled with inequities that are hostile to job growth.  Eliminating these longstanding barriers will level the playing field for taxpayers, encourage entrepreneurship and spur more investment in Michigan.  Working in conjunction with other reforms such as a balanced state budget and refocused economic development strategies, the overhaul of our tax structure lets job providers nationwide know that Michigan is the place to be.”

Some of the changes for individual taxpayers are:

• The current income tax rate of 4.35% will remain in effect until January 1, 2013.  At that time, it will be lowered to 4.25%.  In the Great Lakes states, only Indiana’s flat rate of 3.4% is lower.
• A three-tiered system will determine whether retirement income is taxed. 
  • Taxpayers born before 1946 will continue to receive the current retirement income exemptions as well as the personal exemption, Social Security exemption and the exemption for dividends, interest and capital gains.
  • Taxpayers born between 1946 and 1952 will have a $20,000 single and $40,000 joint retirement income exemption in addition to the Social Security exemption and personal exemption until age 67.  After attaining age 67, the taxpayer will receive a $20,000 single and $40,000 joint exemption against all income in addition to Social Security and personal exemptions.
  • For individuals born after 1952 there will be no deduction allowed for retirement income.  Once they reach age 67, the individual can elect to deduct $20,000 single and $40,000 joint against income.  This exemption can be taken instead of the Social Security and personal exemptions if it is more beneficial to the filer.
• The current personal exemption is fixed at $3,700 through 2012, after that it will be adjusted annually for inflation.  This personal exemption will be phased out for single taxpayers with household income between $75,000 and $100,000 and married couples filing jointly with household income between $150,000 and $200,000.
• Military pensions will continue to be exempt.
• The Michigan Earned Income Tax Credit would be reduced from 20% of the federal credit to 6%.
• Political contributions are no longer deductible.
• An individual born after 1945 can no longer deduct a portion of interest, dividends and capital gains received.
• Non-refundable credits like the public contribution credit, the homeless/food bank credit, the city income tax credit, the vehicle donation credit, the college tuition credit and the community foundation credit (which is a very popular contribution in Midland as well as Mount Pleasant) have been eliminated.

Some of the changes for business taxpayers are:

• The Michigan Business Tax will be replaced with a 6% Corporate Income Tax.  This will only apply to companies that file as “C” corporations effective January 1, 2012.  This means that nearly 100,000 small businesses will no longer have to file returns.  Companies with apportioned gross receipts of less than $350,000 will not be required to file a return.
• The apportionment factor provided by the Multistate Tax Compact is eliminated.  Income will be apportioned to Michigan based on the ratio of Michigan sales to total sales.
• If a company wishes to take advantage of previously issued certified credits, they may choose to continue to file under the MBT Act as opposed to the new corporate tax act to utilize the credits enumerated.  Some of these certified credits are: Brownfield Redevelopment, Historic Preservation, Battery, Film and Michigan Economic Growth and Authority.

If you would like further information regarding the changes, please contact us at 800-448-0257 or 877-299-8334.

Governor Rick Snyder vows in the State of the State Address to eliminate the “job killing”  Michigan Business Tax (MBT).  24 Hour News 8 anchor Sue Shaw and Andrew Johnston, of the Grand Rapids Chamber of Commerce discuss the elimination, challenges with the MBT, and what replace the MBT.