3 big changes coming to 2023 Michigan income tax returns, including extra check for some (2024)

Early birds who love to snag those big income tax refunds will want to know that the Internal Revenue Service will begin accepting and processing individual income tax returns as of Jan. 29.

And for lower- to middle-income working families in Michigan, state income tax refunds could end up substantially higher under some key changes for one tax credit.

The Michigan Department of Treasury said the official start date of the 2024 tax season will be Jan. 29, as well.

Three big changes hit Michigan income tax returns

A major state income tax overhaul in Michigan was signed into law earlier in 2023 by Gov. Gretchen Whitmer, including benefits for families who may be living paycheck to paycheck as they work lower-wage jobs.

Across the board, state residents will benefit from a temporary, lower income tax rate. The flat income tax rate on state of Michigan returns was 4.25% in 2022. And it will be down to 4.05% in 2023. So you should owe slightly less state income taxes or receive a bigger refund, if you had the same amount of income in 2023 as 2022.

Everyone will be buzzing about the state's working families credit

Some 700,000 households in Michigan will benefit from a far more generous Michigan earned income tax credit for working families. The credit jumps from 6% in 2021 to 30% in 2022, 2023 and 2024.

The maximum credit in Michigan is $2,229 for 2023. And taxpayers will benefit retroactively, as well, since the maximum credit was boosted to $2,080 for 2022.

Those who qualified for the state credit and already filed a 2022 Michigan income tax return will receive an extra check in the coming weeks to make up the difference of what they received last year and the amount they would be owed under the expanded credit.

On Feb. 13, the Michigan Treasury will start rolling out these extra supplemental checks based on 2022 returns. People will see the money at different times, as checks will be sent over a five- to six-week timeframe to eligible taxpayers. The checks will provide eligible taxpayers with the remaining 24% portion of their Michigan ETIC for the 2022 tax year.

Don't expect that money to arrive on the spot in February; some eligible taxpayers might not receive a check until later in March.

The average extra refund for the 2022 qualifying Michigan returns is expected to be $550.

Checks are being sent to families who claimed the Michigan earned income tax credit for working families on their 2022 state return and qualified for the federal earned income tax credit for the 2022 tax year. Some families, though, might not qualify for additional money, depending on their income and other factors.

The Michigan Treasury Department said taxpayers should not amend their 2022 state income tax return based on the new higher credit to receive any money owed. The state Treasury will help qualified filers receive the full credit owed for 2022.

Paper checks covering what's owed for 2022 will be mailed to the most recent address that the Treasury has on file. But someone who has moved between tax filings can update their address. See Michigan.gov/taxes/questions.

Matt Hetherwick, chief program officer for the nonprofit Accounting Aid Society in Detroit, said people who qualify for the EITC but did not file a 2022 state income tax return can still do so. But they will need to file a 2022 return before April 18, 2025, to get the full EITC from both their federal and state tax returns.

"It's important that tax filers are aware of the tax credit and that they are filing their tax returns to receive the tax credits they are entitled to," Hetherwick said.

Accounting Aid Society sites are now open. Tax filers can visit www.accountingaidsociety.org or call 313-556-1920 to schedule their no-cost tax prep appointment. No-cost tax preparation services are available for households making less than $64,000 a year.

Michigan's tax on pensions

The third change, and perhaps the most confusing for 2023 state income returns, involves a retirement tax rollback.

Many retirees who live in Michigan will be looking at extra work this tax season to figure out if they can get a better break on their state income tax returns under the new rules.

Some might not be looking at much or any of a state tax break on their pension income when they file their 2023 returns this year. The big savings associated with the move to "repeal the retirement tax" will be down the road for many retirees as new, more accommodating limits gradually phase into place.

One significant shift now: Beginning in 2023, the new state law exempts pension income for public police officers and firefighters, county correction officers, and state troopers and sergeants from the Michigan state income tax.

The big winners in 2023 would be those retirees, including police and fire, who get the exemption right away. Others are looking at a more phased-in approach over a few years that will require running their individual numbers.

Retirees still can opt to deduct their pension and retirement income on Michigan state income tax returns, just as they did in 2022 using old rules, which reflect when you were born. Or they can select to use new rules when addressing any taxes owed on their retirement income. Again, run the numbers to see what is best for you.

A contrived, age-based system went into place in 2012 after Republican Gov. Rick Snyder successfully pushed through a controversial plan in Lansing to tax the pension and 401(k) incomes of millions of retirees. Now, it's going to take some time and a lot of patience to unpack and unravel.

Don't file until you know your numbers are correct

Employers are required to mail wage statements for 2023 — the W-2 and 1099 — to their employees by Jan. 31. You want that document.

Tax experts warn that filing a tax return based on your pay stub from the end of the year isn't wise because the end-of-year stub typically doesn't reflect all taxable income received for a calendar year.

If you're in a rush, it's OK to get other paperwork ready and double check your numbers when you get that W-2. Some employers do give online access to your W-2.

Take care with your tax return

Everyone is looking to save money, including on what they pay for tax preparation services. But dealing with a bad job on a tax return isn't like trying to outgrow a bad haircut. Huge financial headaches, including ID theft, can be triggered if you're dealing with bogus advice or an unscrupulous tax preparer.

"If you’re in the market for a new tax preparer, take care and do your homework," said Luis D. Garcia, an IRS spokesperson in Detroit.

"It’s usually the only time when you give a stranger all this sensitive personal information for yourself and your family," he said.

Check out someone's credentials. Garcia suggests that you research a preparer through the Better Business Bureau and the IRS Directory of Preparers. You can use the IRS directory to determine the type of credentials or qualifications held by a specific tax professional. All tax return preparers are not in the IRS directory.

Garcia advised that you never sign a tax return if the tax preparer hasn't signed it first along with their Preparer Tax Identification Number.

Don't grab the next hot tax tip off social media, either. The IRS warns that "social media can circulate inaccurate or misleading tax information, and the IRS has recently seen several examples."

One popular scam last tax season involved encouraging people to wrongly file an obscure form called "Form 8944," which is a request by a tax preparer for a hardship waiver and applies to a very limited group. Such schemes encourage people to submit false information to boost their refund.

When's the tax deadline?

Federal tax returns based on your 2023 income will be due by April 15 — which is a Monday. The tax deadline for state of Michigan income tax returns is April 15, too.

What's the standard deduction?

3 big changes coming to 2023 Michigan income tax returns, including extra check for some (1)

Many taxpayers do not itemize deductions because the standard deduction is now fairly high. The standard deduction is somewhat higher on 2023 federal income tax returns after an inflation adjustment.

For married couples filing jointly, the standard deduction is $27,700 on federal returns.

For single filers and married couples filing separately, the 2023 standard deduction is $13,850 on federal returns.

And the standard deduction is $20,800 for head of household, tax filers who are generally unmarried with one or more qualifying dependents.

What's the mileage deduction?

On federal returns, some people itemize and need to take into account a mileage deduction. Unfortunately, if you work for an employer, not for yourself, you can no longer deduct unreimbursed mileage driven for work.

The optional mileage rate for 2023 is 65.5 cents per mile for self-employed and business travel. Self-employed individuals can claim business mileage on their tax returns. Those filing 2023 returns in 2024 need to use the 2023 mileage rate. The rules can be complicated, so take time to understand them.

The mileage rate for business use on 2023 returns is one rate, a shift back to a more normal pattern. On 2022 returns, tax filers were given two sets of mileage rates after the rapid climb in prices at the pump.

The mileage rate for 2023 is 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the armed forces.

The mileage rate used when driving in service of charitable organizations remains at 14 cents. This rate is set by statute and remains unchanged.

How long does it take to get a tax refund?

Most taxpayers didn't see the widespread headaches with lengthy delays for their federal income tax refunds in 2023 as they did earlier during the pandemic.

The average federal income tax refund in 2023 was $3,167 based on IRS data through Dec. 29, down 2.6% from the same period in 2022. The total number of refunds was down 4.4%.

But nearly 500,000 people nationwide who were victims of ID theft were still waiting on their refunds as they still had cases pending with the IRS’ Identity Theft Victims Assistance unit at the end of 2023. They found themselves waiting an average of 19 months for the IRS to resolve their problems, according to the National Taxpayer Advocate 2023 Annual Report to Congress.

Lengthy delays hit many who filed an amended return. Unprocessed amended returns stood at 1.9 million as of late October 2023, according to the report.

In general, it can take up to 21 days to receive a federal income tax refund via direct deposit. But often refunds for e-filed returns are issued in less time than that.

A key exception: Taxpayers claiming the earned income tax credit or the additional child tax credit on their federal returns aren’t able to get a refund before mid-February by law. The IRS must delay issuing those refunds in order to avoid fraudulent claims early in the season.

Early filers can expect to see most refunds related to the earned income tax credit or the additional child tax credit to be in bank accounts or on debit cards by Feb. 27 under key conditions. The Feb. 27 date depends on whether the tax filer electronically files the tax return, chooses direct deposit, and the IRS has no other issues with the return, the IRS said.

The IRS is promising that some new improvements will help taxpayers who turn to the “Where's My Refund” tool at IRS.gov. Taxpayers should see more detailed refund status messages, including whether the IRS needs the taxpayer to respond to a letter requesting additional information.

Contactpersonal finance columnist Susan Tompor:stompor@freepress.com.Follow her on X (Twitter)@tompor.

As a tax expert with a deep understanding of the subject matter, I can confidently analyze and elaborate on the key concepts discussed in the article about the changes in Michigan income tax returns for the 2024 tax season.

  1. Tax Season Start Date:

    • The IRS will begin accepting and processing individual income tax returns on Jan. 29.
    • The official start date for the 2024 tax season in Michigan is also Jan. 29.
  2. Michigan State Income Tax Overhaul:

    • In 2023, Gov. Gretchen Whitmer signed a major state income tax overhaul in Michigan.
    • The flat income tax rate on Michigan returns decreased from 4.25% in 2022 to 4.05% in 2023.
    • Residents can expect to owe slightly less state income taxes or receive a larger refund with the reduced tax rate.
  3. Michigan Earned Income Tax Credit (ETIC) Changes:

    • A significant change is the increase in the Michigan earned income tax credit for working families.
    • The credit rises from 6% in 2021 to 30% in 2022, 2023, and 2024.
    • The maximum credit for 2023 is $2,229, and retroactively, it was boosted to $2,080 for 2022.
    • Eligible taxpayers who already filed a 2022 Michigan income tax return will receive extra supplemental checks in the coming weeks.
  4. Michigan's Tax on Pensions:

    • A retirement tax rollback is introduced in 2023, impacting state income returns for retirees.
    • Public police officers, firefighters, county correction officers, state troopers, and sergeants are exempt from Michigan state income tax on pension income.
    • Retirees need to carefully assess their individual situation regarding the phased implementation of new rules.
  5. Tax Return Filing and Precautions:

    • Employers are required to mail wage statements (W-2 and 1099) to employees by Jan. 31.
    • Filing a tax return based on a year-end pay stub is not advisable.
    • Taxpayers are warned against using unreliable tax preparers and advised to check credentials through the Better Business Bureau and the IRS Directory of Preparers.
  6. Standard Deduction and Mileage Deduction:

    • Standard deductions for 2023 federal income tax returns have increased: $27,700 for married couples filing jointly, $13,850 for single filers and married couples filing separately, and $20,800 for head of household.
    • Mileage deduction rates for 2023 include 65.5 cents per mile for self-employed and business travel and 22 cents per mile for medical or moving purposes for qualified active-duty members of the armed forces.
  7. Tax Refund Information:

    • The average federal income tax refund in 2023 was $3,167, with a 2.6% decrease from the same period in 2022.
    • Delays may occur for taxpayers claiming the earned income tax credit or the additional child tax credit.
    • The IRS has introduced improvements to the "Where's My Refund" tool to provide more detailed refund status messages.

Understanding these concepts is crucial for individuals navigating the 2024 tax season in Michigan, as the changes in tax rates, credits, and deductions can significantly impact their financial outcomes.

3 big changes coming to 2023 Michigan income tax returns, including extra check for some (2024)

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