You may owe Use Tax (Sales Tax by another name) on those online purchases!

Nov. 17, 2017

Michiganders purchasing holiday gifts from online retailers can conveniently pay their outstanding use tax when filing their annual Michigan Individual Income Tax Return, according to the Michigan Department of Treasury.

Michigan’s use tax generally applies to purchases made when a retailer does not collect sales tax. This often happens when individuals purchase items through online or mail-order retailers or television shopping networks without physical locations inside the state of Michigan.

“With the kick-off of the holiday shopping season happening after Thanksgiving Day, be sure to check if you are being charged sales tax when you purchase items online,” said Deputy State Treasurer Glenn White, head of Treasury’s Tax Administration Group. “If the online retailer doesn’t charge sales tax, state law requires you to keep a running total and pay your outstanding use tax when you file your annual state income tax return.”

Taxpayers paid millions of dollars in use tax through their state income tax return this filing year, helping fund schools and local police and fire departments. Most of the dollars collected from taxpayers through the use tax go to the School Aid Fund, General Fund and to the Local Community Stabilization Authority

The use tax is calculated at the rate of 6 percent of the total purchase. Items subject to use tax include appliances, books, clothing, computers, DVDs, CDs, electronics, furniture, pre-written computer software and tobacco products.

Taxpayers can report their total outstanding use tax annually when filing their Michigan Individual Income Tax Return between January and April.

Cybersecurity and Tax-Related Identity Theft (from the Michigan Department of Treasury)

Michigan Department of Treasury warning and tips on preventing cybersecurity and tax-related identity theft.

The Michigan Department of Treasury is offering tips on preventing cybersecurity and tax-related identity theft.

This is really good information whether your issue is tax-related or not.

Common sense and intuition prevail–is you think something is amiss it probably is!


2018 Federal Tax Withholding Calculator

Persitz CPA AccountantThe IRS provides a 2018 federal tax withholding calculator

The IRS provides a 2018 federal tax withholding calculator to help you make sure your withholdings are correct.  Because of the: reductions to tax rates; elimination of dependent deductions; and increase in the Standard Deduction and other changes, it is wise to review your W-4 and revise it if necessary.

Even though your employer should be using the new tax tables, it is still a smart thing to do up to you to revise your W-4 so you don’t get a rude surprise when your taxes are prepared next year!

The IRS has provided a Withholding Calculator and link to the new W-4 form for 2018 and this IRS page also has a federal W-4 link.

Please also remember what you need for your federal W-4 may be different from what you need for Michigan (MI-W4) and what you need for your local withholdings if it applies to you.

Meals & Entertainment under the new tax act–important changes (no, the sky is definitely not falling!)

Despite the hyperbole you may have heard, the sky is not falling!

Yes, there are some changes to the tax treatment of meals, entertainment, etc.  And you must still follow the same business purpose and substantiation tests.  Plus, changing your bookkeeping accounts to accommodate these changes back to January 1, 2018 will make it much easier for you at the end of the year when you go to prepare your taxes!

Entertaining Clients:

  • Meals: was 50% and still 50%
  • Entertainment (sporting, concert or other events: was 50% of face value of ticket) now non-deductible

Employee travel meals: was 50% and still 50%

Office Holiday parties: was 100% and still 100%

Meals provided for employer convenience located on employer’s facility:

  • Was: 100% deductible provided the meals are excluded from the employee’s gross income as de minimis fringe benefits; otherwise 50%
  • New: 50% deductible through 2025; non-deductible after 2025

Important Tax Changes Passed Today!

The budget bill, signed today, extends several important tax provisions.

This morning President Trump signed a budget bill averting yet another government shutdown. Tucked in the Bipartisan Budget Act of 2018 are several extender provisions that expired but are now available retroactively through Dec. 31, 2017.

Notable Extenders

Exclusion for discharge of indebtedness on a principal residence

The provision extends the exclusion from gross income of a discharge of qualified principal residence indebtedness through 2017. The provision also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged pursuant to a binding written agreement entered into in 2017.

Premiums for mortgage insurance (PMI) deductible as mortgage interest

The provision extends the treatment of qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction through 2017. This deduction phases out ratably for taxpayers with adjusted gross income of $100,000 to $110,000.

Above-the-line deduction for qualified tuition and related expenses

The provision extends the above-the-line deduction for qualified tuition and related expenses for higher education through 2017. The deduction is capped at $4,000 for an individual whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).

2018 Tax Reform: Pass-Through Income Deduction More Complex Than Thought

From the CPA Practice Advisor for pass-through business entities such as partnerships, LLC’s and S-Corporations, this is an excellent discussion of the issue!