Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

is the state of michigan taxing the first 10,200 of unemployment benefits for 2020?

bertucci
Level 1
 
0 Cheers
9 Replies 9
TaxGuyBill
Level 15

Drake says that Michigan already does not tax employment (or at least a portion of it), so the $10,200 might need to be added back so the State isn't double-deducting unemployment.

https://kb.drakesoftware.com/Site/Browse/17148/State-Conformity-to-ARP-Unemployment-Compensation

 

mappp
Level 4

Not true.  MI does NOT have an exclusion for unemployment. MI will withhold both Federal and MI state tax from unemployment.  MI does use the Federal AGI as starting point for calculation of MI tax and there are some subtractions from the AGI.  Unemployment is not one of the subtractions allowed except for railroad unemployment benefits.  (See MI instructions, pg 14 Misc subtractions)..  I've scoured the MI web site earlier today 3/18, and don't see any mention of adding back the Federal waived unemployment amount.  Still looking for any mention on the MI site.  

https://www.michigan.gov/documents/taxes/CC-41011_608354_7.pdf

TaxGuyBill
Level 15

Oops, I misread the Drake chart (I jumped lines). 

But according to the Drake chart, Michigan is "conforming" to the Federal rules for unemployment.  Assuming that is correct, you would not need to do anything for the State return.

0 Cheers
TGrez
Level 1

Have you found any results from the MI Website or any other information formats regarding the Federal Unemployment Exclusion?

0 Cheers
qbteachmt
Level 15

It should be clarified that "conforming to Feds" does not = the first $10,200 UI is taxable, because that is poorly stated. There is a Fed exemption of up to $10,200 per person.

From: https://www.michigan.gov/leo/0,5863,7-336-94422_97241_89982_92608_63224_105247---,00.html

Unemployment benefits are taxable and must be reported on federal and state tax returns.

From: https://www.kiplinger.com/taxes/state-tax/602307/taxes-on-unemployment-benefits-a-state-by-state-gui...

State Taxes on Unemployment Benefits: Unemployment compensation is subject to tax in Michigan. (Note: Interest and penalties for failure to pay estimated tax on unemployment benefits received in 2020 are waived.)

 

It's amazing what you find when you use a web search, such as google:

MI UI taxable income reporting

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
mappp
Level 4

qbteachmt

The information you're quoting both on the MI site and on Kiplinger's is for a "normal" year.  MI does indeed tax unemployment because it is included in Federal AGI, which is Michigan's starting point.  Then there are some subtractions and additions to MI income.  Nothing on the MI site addresses adding the $10,200 Federal exclusion back as an addition on MI Schedule 1.  But because MI taxes ALL resources, the excluded $10,200 UI must be added back when calculating MI credits.

0 Cheers
qbteachmt
Level 15

"Nothing on the MI site addresses adding the $10,200 Federal exclusion back as an addition on MI Schedule 1"

Unless MI changed their rule to "conform" to CARES, nothing is changed. The same thing is true for MT. This is what that TaxSlayer link shows:

"3/18/21 - Montana will add back the UCE Federal exclusion on the Additions Schedule, Line 14 - Other Additions."

Here's what it means: MT never taxed UI, already. So, on the Form 2, the total AGI is reported with the reduction, from the Fed form. Then, the reduction is added back. Then, the entire 1099-G is removed.

Which isn't at all how you might interpret the TaxSlayer instruction.

 

*******************************
"Level Up" is a gaming function, not a real life function.
0 Cheers
mappp
Level 4

That's how Montana is treating it. 

Michigan is taxing all unemployment over the $10,200 exclusion per person on MI-1040, just as it comes over in the Federal AGI. 

For Michigan credit forms:  MI-1040CR, MI-1040-CR2, MI-1040CR5 or MI-1040CR7 the $10,200 must be added back to income.  Michigan's intention by adding all non-taxable income is to REDUCE the credits they allow.  MI also adds social security, VA disability, and life insurance proceeds along with lots of other non-taxable income to income used for credit calculations. 

mappp
Level 4

MI tax starts with Federal AGI.  So the MI statement that it taxes all UI is correct in normal years. However, if $10,200 is subtracted from Federal AGI, it will not be taxed by MI, since MI has not set up any requirement to add it back  EXCEPT when calculating the MI credits, the full amount of unemployment must be included in "resources".  MI credits use all resources (income), taxable or not.  There is nothing on the MI site that addresses the adding the $10,200 UI exclusion back into taxable income, only for credits.  TaxSlayer Support has a great, state by state listing of how each state is treating the UI exclusion at  https://support.taxslayerpro.com/hc/en-us/articles/1500004451042-State-Conformity-to-the-2020-Federa....  

0 Cheers