THE TAX ATTIC with Jerry Coon

MI-UA demands repayments

Jerry Coon

I have to admit that my favorite game is baseball and my favorite song is “Take Me Out To The Ballgame.” It was the first song I taught our oldest daughter, Stephanie, to sing and she finished that version off with a resounding “Go Tigers.” That was in the mid-1980s and the Detroit Tigers had a great team back then. After a decade in the 1990s of setting records for futility, they are back. The current version is a good team and has some very good players. They are well worth rooting for. I’m way past the baseball-playing age but, despite that age, I continue to play slow-pitch softball and still get butterflies in my stomach before the first pitch of a game. I hope that feeling never goes away and the crowds continue to sing my favorite song from time to time during the seventh-inning stretch.

I do have a couple of other more conventional favorite songs. I listen occasionally to the 1974 song of Lynyrd Skynyrd, “Sweet Home Alabama,” and George Thorogood and The Destroyers’ 1982 hit “Bad to the Bone.” Neither one gives my stomach butterflies, but I do like their beat.

I also enjoy listening to jazz and blues. I couldn’t actually name the title to one jazz or blues song, but hearing the River City Jazz band play at last weekend’s Arts Festival or sitting on the grass down by the dam at the Garden Club Park and taking in a blues performance as part of the Huntington Rogue River Blues Series is quite enjoyable. The blues series starts on Tuesday, June 15 and runs throughout the summer. Of course, the series happens to be held on Tuesday night and that is the same night I play softball. That means until the softball season ends in late July, don’t look for me down by the dam. I will be at the place that gives me butterflies in my stomach and reminds me of my favorite song, i.e. the old ball park.

During the Michigan budget discussion, a report came out that declared our Michigan Unemployment Agency (MI-UA) has erroneously paid out millions of dollars in benefits in either fraudulent claims or mistaken claims to people who should not have been receiving benefits. At the time, MI-UA said they were going to start billing back those amounts and demanding repayments. Evidently, MI-UA was serious because we are now seeing some of those bills.

As a Michigan employer, that’s a good thing, because my rate to some extent is based on the total amount of benefits paid out to everyone in Michigan. As a general taxpayer, that’s a good thing because it’s just not fair that some people are receiving more than they have legally coming.

In any event, the question we are now answering is this: When the benefit amount is paid back to MI-UA, are the taxpayers allowed to deduct that amount from their tax return? The answer is: It depends.

If the amount is paid back in the year the original amount is received, the current benefit is simply reduced by the amount paid back. The tax savings are immediate. However, if the amount is paid back in a year following the year the original benefit was received, the answer is more complicated.

If the amount paid back is $3,000 or less, the deduction must be taken on the taxpayers’ Schedule A as a Miscellaneous Itemized Deduction and is subject to the 2% of Adjusted Gross Income (AGI) reduction. The taxpayers must itemize their deductions in order to realize a repayment benefit. That means if the taxpayers aren’t able to itemize their deductions, they may not realize any tax benefit.

If the amount repaid is more than $3,000, the taxpayers have a choice. They may take the Schedule A deduction as a Miscellaneous Itemized Deduction subject to the 2% of AGI reduction or they may calculate and get a credit for the repayment amount. They can choose whichever method gives them the larger benefit. The credit is calculated by going back to the previous year and reducing that year’s income by the amount repaid. The credit is the amount that their tax is lowered by the repaid income. The credit is then claimed on the current year tax return as additional tax paid.

Who would think such a simple thing as repaying a MI-UA benefit could become so complicated? But that’s our tax system. No wonder there are those who push for a flat tax. I’m not there quite yet, but give me a few years and who knows, I might become an advocate.

I would like to put in a plug for another event that is going on all summer long in downtown Rockford. Our farm market started last Saturday morning. It was busy with many vendors having a variety of products available. My wife, Deb, tells me the freshly picked asparagus was excellent. As noted in last week’s Squire, the American Farmland Trust is running a contest for being named the best farm market in America. They have divided up all farm markets into three sizes and classed Rockford as a mid-size farm market. If you like our farm market, you can place a vote by going online to www.farmland.org/vote. Enter Rockford’s zip code, 49341, and follow the directions. In order to keep people from stuffing the ballot box, it appears that only one vote will be allowed from each e-mail address. The voting continues through August 31 and the winning farm markets will then be featured in a national publication along with receiving various assorted prizes. Let’s support our local farm market. This is Jerry Coon signing off.

Jerry Coon is an Enrolled Agent. He owns Action Tax Service on Northland Drive in Rockford.
Contact Jerry at www.actiontaxservice.com.

 

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