UIA Rate Tax Reduction

The State announced that All employers will receive a Tax Reduction in their unemployment rate effective January 01, 2020.  This reduction is five months ahead of schedule.

The Obligation Assessment was a 10 year plan initiated in 2012 to repay the federal government, the $3.2 billion debt owed to the US Treasury.  To assist with paying the excessive number of Unemployment claims, the federal government loaned the state money.  In 2012 it was determined that the Obligation Assessment was necessary to gradually force all employers to assist in paying the debt back to the federal government.

Due to the growth in the state, more UIA revenue is now collected than originally expected.  The solvency of the state allows the Obligation Assessment to now be totally eliminated.  All employers will receive a $65 – $217 per employee tax savings.

Use the attached table to determine your 2020 savings.

Find your 2019 UIA Rate in the table.  Find your savings per employee and then multiple by your number of employees.

2020 Minimum Wage Rate Increase

Effective 01/01/2020, the State of Michigan increased the Minimum Wage from $9.45 to $9.65.

Employees age 16 to 19 years old must now be paid $8.20.  In their first 90 days of employment, a training wage of $4.25 is allowed.

For Tipped Employees, the new hourly minimum wage is $3.67 and Reported Average Hourly Tips Rate is $5.98.  Tips received plus wages paid must equal or exceed the minimum hourly wage rate and if it does not, the employer must pay the shortfall.

IRS withholding Tax Estimator

Allow time to complete the new IRS Withholding Tax Estimator. Even though the IRS makes it appear easy, there are still at least 4 parts to complete and may be as many as 6. Have your 2018 1040 handy. Caution: If there will be significant changes from your 2018 to 2019 return, ask a tax preparer for help.

  • Did you marry in 2019?
  • Did you divorce?
  • Did you start or lose a business?

Part I : “About You Do you know if you should be claiming “Head of Household”? If you don’t, that can be a thousand dollar error. This section consists of 9 questions.

Part II : “Income and Withholding. To complete this section, have your last paystub available. You can answer 10, 20, or maybe even 30 fields depending on your Filing Status and Pensions.

Part III : “Adjustments” consist of eight categories, including the Impact of Student Loans, Alimony, and Early Withdrawal Penalties.

Part IV : “Deductionsgives you the chance to input your Itemized Deductions. These include Medicat and Dental Expenses, Taxes Paid, Qualified Mortgage Interest, Gifts to Charity, and more. Did you use your 2018 Itemized Deductions , or what you “Think” this year will be?

Part V : “Tax Creditslist Foreign Tax Credit, Educational, Retirement Savings, Homeowner, and others.

Part VI : “Results” lists whether or not you will need to put more in for taxes.

Don’t hesitate to ask your tax professional for help or to do this for you, If you check the Head of Household Box when you should have checked single, your results may be that you’ll receive a refund, when you should be depositing $1,000 more in taxes. A mistake as this can result in penalties.

If you want to learn about the Alternative Minimum Tax Credit, click on the “?” and the IRS will explain it to you in 2 sentences. Or read about Form 5801 to complete the Prior Year Minimum Tax Credit. These are complex concepts.

The IRS encourages “everyone” to use the Estimator. It is User Friendly, but taxes are not. Using this Estimator if you do not understand what you are doing,  Not depositing the correct amount for taxes can be more costly.

Do I File my Tax Returns if I don’t have money to pay?

YES!  Effective January 1, 2020 the IRS will start penalizing Individuals $330 for Form 1040 Tax Returns due after December 31, 2019, but only if you owe money

If you are due a refund, you will receive your refund without interest when you do decide to file.  The IRS only refunds tax payers on late filed returns up to 3 years back.

The IRS knows if you owe them money.  All W2’s and Form 1099’s are recorded and sent to the IRS annually.  They know your income big or small.  They know your mortgage interest and possible income in your stock sales.

You may as well file your Form 1040 Tax Return timely.  You are not helping yourself by not submitting.

A client came into our office in December of 2018 and had not filed a Tax Return since April of 2009.  His wife died in 2010 and a “family friend”, not a tax preparer, told the gentlemen that he did not need to file a Form 1040 Tax Return.

What the “family friend” did not know was that the client was having Federal and State taxes withheld from his Pension and Social Security Benefits that exceeded the taxes owed.

In other words, the client gave up $18,238 in tax refunds that he could have collected for Tax Years 2010 to 2015. In 2017, the same gentlemen was penalized for not filing his 2017 Form 1040 because he owed money to the IRS.

It never pays to not file your Tax Return – However you look at it.

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