How to reduce Michigan tax withholding?

[doitmyself]

I have a few inquiries out to tax CPI/consultants with no replies yet. At age 67 I am eligible for the new Michigan Tier 3 deduction, $30,000 in my case. My Michigan 4.25% tax withholding is being applied to my total taxable income, NOT the income minus the $30,000 deduction, resulting in a much larger withholding/refund than I like.

Here's an example using made up numbers: Pretend my total taxable income is $100,000. Michigan withholds $4250. During tax filing, I apply the new $30,000 deduction: $70,000 x 4.25% = $2975. In this example, I would get an extra $1,275 withholding/refund.

How do I reduce the withholding? The MI W4 only has a line to increase withholding. Can I claim more than 2 exemptions? Be aware that tax laws have changed a bit since 2019. I'm not asking financial investing advice, just simple nuts & bolts instructions. Thank you.

 

[wwillson]

I think you need to ask a qualified tax accountant. Questions with taxes seem simple and rarely are.

 

[64bawagon]

Is this part of the rollback of income tax on pensions ?

 

[92saturnsl2]

I think you need to ask a qualified tax accountant. Questions with taxes seem simple and rarely are.

I disagree, I watch people throw money away all the time paying high dollar professionals for what are 10 minute returns...

OP: I don't know the specifics for Michigan. I assume Michigan has something similar to the IRS W-4 for withholding calculation. If Michigan is anything like federal withholding (likely is), you can claim as many exemptions as you like. It's just a "calculator" employers use to get you in the ballpark of withholding vs what is owed at the end of the year. For most people it usually closely zeros out or yields a small return if they fill the form correctly.

But you can fine tune it to suit your individual circumstance. The danger is that if you withhold too little (by way of exemptions of whatever you put on that form), you will have to pay back the taxes when you file, and possible owe a penalty if too little tax was withheld.

A deep Google dive on how MI withholding works would be the first place I would start, followed by how it compares to federal W4 withholding, which is pretty forgiving-- the math always comes out in the end no matter what you put on the W4.

 

[doitmyself]

wwilson: I think you need to ask a qualified tax accountant. Questions with taxes seem simple and rarely are.

Short follow up. @wwillson is most correct. I've been doing our simple taxes for decades without problem. After weeks of denial that I could not conquer current changes (mine and gov't) on my own (doitmyself??? LOL), I gave in and sought a tax advisor. Even she admitted the conundrum that the State and Federal tax laws are.

In short, she did not give us a cookbook formula. Instead she gave us about a half dozen alternative ways to achieve the same results. At the end she said that we are still somewhat guessing. We will have to monitor monthly earnings statements and maybe do more adjusting. IRS Tax estimator, W-4, W-4P, W-4V, MI W-4, MI W-4P ........whew, conflicting steps in both Federal and State instructions.

Mind boggling for us OCD types that prefer to be self advocates. At my age I should already be aware of the ineptness or our government. Sigh.

Have a great week everyone!!