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The Michigan Department of Treasury is urging taxpayers to file amended Michigan individual income tax returns if they have already filed without reporting unemployment compensation exclusions for the 2020 tax year. Previously, taxpayers were encouraged to wait to make any amendments to their Michigan returns, as the Internal Revenue Service (IRS) confirmed it would recalculate taxpayers’ taxes for federal returns. There is hope the Michigan Department of Treasury could also leverage a similar automated tool to recalculate taxes, but there isn’t currently a timeframe or confirmation from the IRS this will be possible. As a result, Michigan individuals who wish to take the exclusion are encouraged to move forward with filing an amended return to claim any refunds owed.
Michigan taxpayers who qualify to receive a refund from the unemployment exclusion should file amended returns and claim the refund if they claimed a refund on their original return or paid any taxes due upon filing the original return. When amending a return, those who claimed the refund on the original return must check the box on line 31a of Form MI-1040 and indicate any refunds received from the original return on the line.
Individuals who owed tax on their original return may have deferred their tax payments to a later date, such as the Michigan extended filing date, May 17, 2021. The unemployment compensation exclusion may possibly reduce tax liability for some taxpayers subject to their deferred payments and could even eliminate the payment completely. Taxpayers who fall under this category should also file amended returns. However, since the tax payment is pending, there are two factors to consider when tax is owed.
1. Stopping the Payment
Prior to filing an amended return, taxpayers should try to cancel their pending payments by contacting the financial institution issuing the payments. In the event the scheduled payment is canceled, taxpayers must pay any tax owed on the return at the time of filing their amended return. Upon filing their amended returns, taxpayers should not write the amount of the original return payment on line 31b of their amended MI-1040.
2. Payment Isn’t Stopped
If the payment cannot be stopped or the amended return is filed after the scheduled payment date, the original return payment will be processed along with the original return. In this event, taxpayers should claim a refund on their amended returns. When filing their amended returns, they should check the box on line 31a of the amended MI-1040 and denote the amount of their original return payment on that line.
If you are taking the unemployment compensation exclusion and need to file an amended return, contact Doeren Mayhew’s Michigan tax advisors today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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