Individual Income Tax

Individual income taxes are due throughout the year via withholding or estimated tax payments. For most, their W-2 withholding will cover their liability, but if additional taxes are due, they should be paid with Form 1040-ES, Estimated Tax Payment Voucher. The due dates are the following:

• Voucher 1 – due April 15^th for income earned between January 1^st and March 31^st of the tax year
• Voucher 2 – due June 15^th for income earned between April 1^st and May 31^st of the tax year
• Voucher 3 – due September 15^th for income earned between June 1^st and August 31^st of the tax year
• Voucher 4 – due January 15^th of the following year for income earned between September 1^st and December 31^st of the tax year

If taxes owed on the filing deadline are more than $1,000, interest and penalties may be assessed. An extension of time to file a tax return does not extend the date payments are due.

Corporate Income Tax

Corporate income taxes are due throughout the year via estimated tax payments if the corporation is expected to owe $500 or more. The due dates are the following:

• Voucher 1 – due April 15^th for income earned between January 1^st and March 31^st of the tax year
• Voucher 2 – due June 15^th for income earned between April 1^st and May 31^st of the tax year
• Voucher 3 – due September 15^th for income earned between June 1^st and August 31^st of the tax year
• Voucher 4 – due January 15^th of the following year for income earned between September 1^st and December 31^st of the tax year

If taxes owed on the filing deadline are more than $500, interest and penalties may be assessed. An extension of time to file a tax return does not extend the date payments are due. It is important to note that this is applicable only to C Corporations; S Corporations do not pay tax on income earned, but instead pass the income down to the shareholders, who then incur the associated liability.

A taxpayer’s liability is highly variable by individual or couple; no situation is the same. Marginal tax brackets cause different portions of income to be taxed at different rates, certain types of income (such as long-term capital gain income) may be taxed at preferential rates, and credits and deductions (such as the Child Tax Credit) can affect the liability as well. To get the most accurate understanding of taxes due, taxpayers should meet with their CPA before the first estimated payment deadline, and check in quarterly to discuss any changes, if necessary. If simply looking to avoid interest and penalties, a “safe harbor” amount can be used as the estimated liability until the April 15^th deadline. The safe harbor for individuals or couples whose adjusted gross income (“AGI”) is below $75k or $150k, respectively, is 100% of the prior year’s tax. For “high income taxpayers” whose AGI is above these amounts, the safe harbor amount is 110% of the prior year’s tax. If one quarter of the total of these amounts is paid throughout the year by the quarterly deadlines, or if the total amount due upon filing the return is under $1,000, no interest or penalties will be assessed.

Individuals may make estimated tax payments and payments due with Form 1040 online, by phone, by mail or in person with cash, a check, a money order, a bank transfer, or a debit/credit card, depending on the method chosen. See Instructions for Form 1040-ES for specific information regarding estimated tax payments, and Instructions for Form 1040-V for specific information regarding payments for taxes due with the return.

C Corporations must make estimated tax payments and payments due with Form 1120 by Electronic Funds Transfer (“EFT”). See Instructions for Form 1120-W for more information regarding the EFT payment process.

The Michigan Homestead Property Tax Credit is a refundable credit available to certain taxpayers who pay property taxes or rent for a principal residence in the State of Michigan. To qualify for the credit, all the following must apply:

• You owned or were contracted to pay rent and occupied a Michigan homestead for at least 6 months during the year on which property taxes and/or service fees were levied. If you own your home, your taxable value must have been $143,000 or less.
• Your total household resources must have been $63,000 or less for the tax year (annualized for part-year residents)
• You must not have received 100% of your total household resources from the Michigan Department of Health and Human Services

For purposes of this credit, “homestead” is defined as a permanent home you plan to return to whenever you go away. You cannot have more than one homestead. “Household resources” may include non-taxable income, such as Social Security Income. The credit may be claimed on Form MI-1040CR, filed with the return if a return is necessary or on its own if not. You may find more information on the Michigan Homestead Property Tax Credit here.

The Child Tax Credit is a partially refundable credit available to taxpayers with qualifying children. the credit is $2,000 per child under the age of 17 at the end of the tax year, and the refundable portion for 2023 is $1,600. For the credit to qualify he or she must:

• Be your son or daughter, stepchild, eligible foster child, brother or sister, half-brother or half-sister, or a descendant of one of these
• Not have provided more than half of their own financial support during the tax year
• Have lived with you for more than half the tax year
• Be claimed as your dependent on your tax return
• Not file a joint return with a spouse (or only file it to claim a refund)
• Have been a U.S. citizen, national or resident alien

The credit will begin to phase out (be reduced) if your modified adjusted gross income (“MAGI”) exceeds the following:

• $400,000 if married filing joint or as a qualifying widow or widower
• $200,000 if filing as head of household
• $200,000 if single or married filing separately

Gulla CPA will collect your tax information from you electronically, over the phone, and/or in person, depending on the situation and your preference. Depending on the complexity of your return(s) and your personal preference, we may complete them on site when you bring in your tax information to us, or you may drop it off or upload to our online portal and we will complete in the order in which we receive support. If dropping off, once your return(s) are complete, we will contact you via phone to communicate your taxes or refunds due, and discuss how you would like to receive your documents, sign your return(s) and pay your invoice. In most cases, we will request your signature on Form 8879, IRS e-file Signature Authorization, which will allow us to electronically file your returns on your behalf. If your return must be paper filed, we will coordinate with you to receive a physical signature on the required pages of your returns and send in on your behalf. Please contact us with any additional questions on the process.

When faced with a higher amount due than the year prior, taxpayers generally assume that they’re getting a “bad deal,” that a mistake must have been made or a change to the law out of their favor must have occurred. While these situations do present themselves, an increase in amount due with the return is most often a result of changes to the taxpayer’s situation in the year in question. Consider the following scenarios:

• You invested in stocks during 2023 and decided to sell your shares for a gain in 2023. Unless you made an estimated payment during the tax year, the tax on the gain would be due with your return upon filing.
• You decided to start a “side hustle” during the tax year. You made an estimated payment based on your marginal Federal income tax bracket, not considering Medicare and Social Security taxes assessed. Additionally, you did not realize that since you are self-employed, you will owe both the employer and employee portion of these taxes, totaling 15.3%.

These scenarios are examples of situations that may increase the amount which you will owe or decrease the amount which you will receive as a refund upon the filing of your return. If you are unable to determine what may have caused the change, consult with your tax preparer.