Michigan police pension subtraction

[TaxLegacy]

Michigan police and EMT pensions are supposed to be 100% tax free.  How or where is that being addressed on the tax return?

[dascpa]

I'm not in Michigan but typically state adjustments are done of the Federal 1099-R input worksheet.  Under state code click for Help and link to all state's codes.

[TaxLegacy]

It is new for 2023, and there is no worksheet to input information regarding the pension subtraction. 

[Glossy847]

In NYS, pensions exempt from state taxes I put code G in the box for state use codes.  Check to see if you can use the same code for Michigan

[PATAX]

If it is new for 2023 then it is possible that the software has not yet been updated to reflect this. In Pennsylvania there is a separate worksheet within the PA module that lets you indicate whether a pension and/or annuity is taxable or not.

[mappp]

In the Federal return on the 1099-R Federal worksheet, use line 16-1, state distribution and state use code.  Put a "G" in the state use code. In the MI return, Form 4884, Part 4, Section A, will automatically do the calculation for the maximum deduction from any taxable pension.

[dtewsley]

Sorry, Doesn't work.

[dtewsley]

I contacted ProSeries technical support twice and they are dumbfounded. Zero answers to my question even though it was signed into law back in January 2023. Not impressed. 

[TaxLegacy]

Proseries has not been any help in this matter yet.  They have not been able to answer my issue.  The state use box code G does nothing and calculates nothing.  On form 4884, there is a box to fill in for Michigan police, emt, and fire but it does not calculate or go to another form???  

[BobKamman]

Michigan pension exclusions are so convoluted that I don't know how anyone figures them, with or without a computer.  Somehow it gets from the Form 4884 to the schedule for subtractions, but maybe you can't use more than one exclusion per taxpayer, or it automatically figures the better exclusion.  I don't have any Michigan clients, I just took a look at the MI-1040 instructions and it confirms my opinion about a lot of what goes on with Michigan government.  

[mappp]

My previous post, I think, is correct in how the police/EMT pension deduction should work. Subtraction would be figured in Section A, Form 4884.  I suspect that there needs to be a new code for the police subtraction rather than using the "G" for government.  That subtraction is figured in Section D on Form 4884.  MI is in the process of reverting to the previous method of not taxing a large amount of pension dollars ($120K+ MFJ and $61K single).  They are spreading this change out over 4 years.  MI does allow more than one kind of subtraction - currently military and railroad pensions are not taxed.  And, yes, MI is very convoluted in anything they do with taxes.  Their website leaves a lot to be desired.

Intuit has obviously dropped the ball and any MI return with police or EMT pensions will have to be held until Intuit corrects the software.

Does anyone have any info on when the software correction will occur?

[dtewsley]

This is my 40th tax season here in Michigan. I have talked to many CPA's from around the US and they all agree with you. Be thankful you never had to prepare a Single Business Tax return, now defunct. Thankfully they listened to us and changed to a simplified business income tax return. Instead of some wacky hybrid return. 

[dtewsley]

PA 4, the Lowering MI Costs Plan, signed into Michigan law on March 7, 2023.

PA 4 takes effect on February 13, 2024. However, as it relates to the retirement deduction options, once effective, PA 4 applies to tax years beginning in 2023.

Lets hope ProSeries is aware of this and updates the Michigan software. 

[Intuit_Ruben]

There is a pension deduction worksheet that already exists in the MI-1040 formset. Are you able to use this? 

[mappp]

This pension deduction worksheet does not correctly handle the new police, fire department, state police or corrections officer deduction.  These pensions have now been determined to be fully deductible.   There has to be a way to separately identify the police/fire pensions from other pensions.  Currently the program does not allow direct input on MI Form 4884.  MI instructions state to complete "Worksheet 2 and Section A" of Form 4884 and take the larger deduction.  No way to do this without separating the pensions that go on Line 3 and Line 6 of the worksheet and Line 12 and Line 14 of Section A.  We need to be able to code the pensions correctly in the program or allow input on Form 4884.  This is how I'm reading the instructions and could be totally off-base but I cannot see any way to handle the pension differences without correcting the software.

[hlsharplin]

The Pension deductions happens on form 4884 part 1 line 6. but doesn't work. they say it comes from a work sheet but can find it. police, fire, EMTs< ems worker are 100% deductable

[mappp]

Is ProSeries going to fix this problem?

Is ProSeries even working on this problem?

Any information or an update would be appreciated

[dmalek53]

I think there are two issues with MI pension for police and firefighters. First these pensions are totally tax free regardless of amount but the Forms issues by Michigan do not address this issue even though their website state that Form 4884 is updated. The instructions talk about it but there is no direction as to what line you enter the subtraction. Secondly, due to about software companies believe the form calculation is correct since there is no direction from MI because MI did not change the Form!

[JeffV]

It seems Proseries tax software has been updated to allow for the exclusion of government pensions under Michigan Public Act 4 of 2023.  I marked the pension type as G and I scrolled toward the bottom of Schedule 1 deductions and check-marked the box for "qualified benefits from fire, police, or corrections service" within the Retirement Status Smart Worksheet.  

[jkuhn]

There is now a check box available for this exclusion on page 2 of the Michigan Schedule 1  Retirement Smart  Worksheet.  I had to search for it, but it works.

[tom789987]

The schedule 1 has a area of pensions below Line 23 for marking if pension involved when marked the 3.3 is removed completely and makes it accurate