News

The MICPA Advocacy Team has been in constant communication with the Michigan Department of Treasury regarding questions surrounding the federal tax exemption of unemployment benefits and what that means for state tax returns. The Michigan Department of Treasury’s Taxpayer Advocate provided our team with the following update:

There is no state-level deduction for the unemployment compensation relief provided by the American Rescue Plan Act of 2021. Rather, the federal adjustment will result in a lower Adjusted Gross Income for many federal taxpayers. For state purposes, “taxable income” is defined in MCL 206.30 as “adjusted gross income as defined in the [IRC] . . . .” Therefore, the federal exclusion of certain unemployment compensation will result in a lower federal AGI, which will flow-through to the Michigan return resulting in a lower “taxable income.”

For taxpayers that have not yet filed at the state or federal level, they can do so– the IRS has worksheets in place right now to accommodate the filing. In addition, the software developers have made the necessary updates as well.

For taxpayers that have already filed, we’re asking taxpayers to wait on filing any amended Michigan return until we learn how the IRS will communicate (if at all) any adjustments they make to the states.