Boy, talk about putting taxpayers in a bad position:

The State of Michigan passed a new tax law signed by Governor Whitmer on December 20, 2021 which affected the 2021 tax returns in a big way

Never has there been a new law passed so close to the tax filing season.

In the past, legislators always gave taxpayers and their professional advisors time to re-write programs, study the law, and adjust their procedures.

To make matters worse, it is a complicated law affecting both business and personal returns. Plus, the rules on how to implement it did not come out until mid-March of 2022 with about 20 days left in the tax filing season.

The new law did the following:

Under prior law, state income taxes you paid were a limited deduction on your federal personal tax return. For high tax states like New York, New Jersey, and California, this was a big hit for their taxpayers because the state income tax deduction was significant for those taxpayers.

To solve the problem and do a work-around the federal limitation, high tax states wrote laws that moved the state income tax deduction from the personal returns to business returns where it was 100% deductible.

The State of Michigan just followed suit, passing a new law that allows high-income taxpayers to pay the Michigan taxes on their business return thereby making it fully deductible.

But to make it deductible on your 2021 taxes the taxpayer must make an advance payment by March 15. We were notified of this around March 10.

Needless to say, the timing of this was horrible but Kallas was able to muster its resources, contact our high-income taxpayers, and make the payments – all in a couple of intense days.

Kallas will be studying this law more intensively over the next few months to see how we can apply it to more taxpayers for 2022.

If you have any questions regarding how this affects you, call Nick or Tony at Kallas.