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Many pensions may be affected by 2012 state law

April 2, 2012
By JOHN PEPIN - Journal Staff Writer (jpepin@miningjournal.net) , The Mining Journal

MARQUETTE - The Michigan Treasury Department has a good deal of great information available to explain Michigan's new taxes for pension recipients.

Treasury officials are reminding the public that if your pension is affected by the 2012 law changes, it is your responsibility to contact your pension administrator to ensure taxes are being withheld from your pension payments.

Effective Jan. 1, Michigan's tax treatment of pension and retirement benefits changed and these benefits became subject to income tax for many recipients.

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Michigan law now requires the administrators of pension and retirement benefits to withhold income tax on payments that will be subject to tax.

Under Michigan law, qualifying pension and retirement benefits include most payments that are reported on a 1099-R for federal tax purposes

This includes defined benefit pensions, IRA distributions and most payments from defined contribution plans.

Payments received before the recipient could retire under the provisions of the plan or benefits from 401(k), 457, or 403(b) plans attributable to employee contributions alone are taxable under Michigan law.

Exceptions include military pensions, Social Security and railroad benefits continue to be exempt from tax. Only companies over whom Michigan has taxing jurisdiction are required to withhold Michigan tax from your pension and/or annuity payment or payments.

If your pension administrator does not fall under Michigan jurisdiction you may request to have Michigan tax withheld, but the company is not required to do so.

If taxes are not withheld from your payments, it is likely you will be required to make estimated payments in place of the withholding.

Contact your pension and/or annuity administrator to verify if tax will be withheld from your payments. Rollovers not included in the Federal Adjusted Gross Income (AGI) will not be taxed in Michigan.

Contact a tax professional for advice. The treasury website offers a helpful frequently asked questions section to help explain the finer points of the new taxing scenario.

The information, including a video, can be found at: www.michigan.gov/taxes/0,4676,7-238-43513_59451-264547--,00.html

John Pepin can be reached at 906-228-2500, ext. 206.

 
 

 

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