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2005 MUSKEGON M-1040 INSTRUCTIONS
WHO MUST FILE A RETURN paraplegic, quadriplegic, hemiplegic or totally and permanently disabled.
Every individual who had $600.00 or more of Muskegon taxable income during Individuals claimed as an exemption on a parent's return may claim
2005, must file a City of Muskegon Individual Income Tax Return, Form M- themselves on their own return.
1040. Multiply line 17 by the proper tax rate to compute tax liability.
The filing of a declaration of estimated tax does not excuse a taxpayer from Be sure Muskegon tax withheld as claimed on line 19 agrees with the total tax
filing an annual return even though there is no change in the declared tax withheld on the W-2 forms attached to return.
liability or an additional amount of tax due. The credit for payment of 2005 Estimated Income Tax, line 20 is the actual
Partnerships, corporations, estates and trusts shall file on forms provided for amount paid to the city for the 2005 tax year, not the allowable itemized
their specific use. deduction claimed on the federal return.
Filing must be made on City of Muskegon forms. Other cities' forms are not Credit for income tax paid to another Michigan city is claimed on line 21.
acceptable. Attach a copy of the other city's return to support credit.
The fact that a taxpayer is not required to file a federal income tax return does If the total tax payments and tax credits, line 23, are less than tax liability, line
not relieve him/her from filing a Muskegon tax return. 18, enter the tax due on line 24. If the tax due is more than $1.00, THE TAX
MARRIED PERSONS - JOINT OR SEPARATE RETURNS DUE MUST BE PAID WITH THE RETURN WHEN FILED, OR BY THE DUE
DATE.
Married persons may file either a joint return or separate returns. If a joint
return is filed, all income of both husband and wife must be included in the If line 23 is more than line 18, show overpayment to be donated on line 25 or
return. A joint return must be signed by both individuals, otherwise, it will not refund requested on line 26 or credited to 2005 estimated tax on line 27.
be treated as a joint return. Both names must be listed in the heading (i.e. The taxpayer, the spouse if a joint return, and the person preparing the return
John A. and Mary B. Doe). MUST SIGN THE RETURN.
If separate returns are filed, neither spouse can claim the other as a ADJUSTMENTS AND DEDUCTIONS ALLOWED
dependent on their separate return. In addition, children and other dependents No deductions are allowed for personal expenses or itemized deductions such
may only be claimed by the spouse who claims such dependents under the as, taxes on your home, sales tax, church and charitable deductions or
Federal Internal Revenue Code. medical expenses.
Couples married during the year where one spouse had a different residency No deductions are allowed for state or federal taxes paid.
status than the other may file separate returns, based on each one's place of
employment and residency during the year, or the couple may file a joint return The adjustments allowed are those from page 1 of the Federal 1040; IRA
using Form M-1040TC to compute their tax. deduction, moving expenses, Keogh and SEP plans, alimony and IRA
deduction on page 1 of Federal 1040A. Adjustments to income include the
EMPLOYERS THAT DID NOT WITHHOLD following:
On page 2, Schedule J, list employers who paid you or your spouse wages in MOVING EXPENSE for moving into the Muskegon area. Do not include
2005, but did not withhold Muskegon income tax and did not furnish a city expenses of moving from Muskegon. Attach a copy of Form 3903 or
copy of Form W-2 for Muskegon. similar schedule.
AMENDED RETURNS EMPLOYEE BUSINESS EXPENSES after adjustment for any
An amended return, M-1040-X, must be filed where necessary to report reimbursement by employer, but not subject to the 50% federal reduction
additional income, pay additional tax due, or claim an additional refund. An for meal expense. Attach a copy of form 2106 or, similar schedule.
amended return is due within 90 days of the date of a final determination of a Expenses are those allowed per IRS Code, limited to travel only.
federal tax liability which also affects the city income tax liability. Business expenses claimed on Line 4 of Federal Form 2106 are not an
INSTRUCTIONS FOR PAGE 1 allowable deduction on the Muskegon return unless the taxpayer qualifies
as an outside salesperson. Prorate on basis of related taxable income.
Enter your name, social security number, address and occupation in the boxes Expenses related to non-taxable income are not allowed
provided. IRA, Keogh, and SEP adjustments are allowed in proportion to taxable
If a joint return, enter spouse's first name, social security number and income if allowed on Federal return. Adjustments related to income not
occupation. taxable by Muskegon are not allowed.
Social security numbers must be correct and agree with those on the attached FORFEITED INTEREST - allowed for residents only.
W-2 forms. THIS IS IMPORTANT. ALIMONY - must be prorated on basis of Muskegon taxable income to
Enter the name of your present employer. Federal taxable income. Do not include child support.
If a joint return, enter spouse's present employer. Supplemental unemployment benefits (S.U.B.) are not taxable, therefore,
If married and filing a separate return, enter your spouse's name and social repayment of (S.U.B.) is not allowed as a deduction.
security number in the separate return box. If you were married in 2004 and EXEMPT INCOME
had a different residency status from that of your spouse, file separate returns
or use Form M-1040TC. The following income (included in column I) is not taxable to either a resident
or non-resident and should be excluded in column II and explained on the
Check the proper box to indicate your residency status. appropriate schedule on page 2.
If you were a resident for only part of 2005, use form M-1040TC to compute Gifts and bequests; non-profit bingo winnings;
your tax and attach it to the M-1040 filed. Proceeds of insurance, annuities, retirement plans (excluding early
Complete the exemptions section by checking the boxes that apply to yourself distributions) and social security;
and spouse, if a joint return. Enter the first names of dependent children that
live with you and the total number of other dependents, their full names and Welfare relief, unemployment benefits including supplemental unemployment
relationship, and the total number of exemptions claimed. benefits (S.U.B.), and worker's compensation.
In column I enter income from Federal Return. In column II enter income NOT Interest from U.S. bonds, Municipal Bonds and Treasury Bills;
subject to Muskegon income tax (exclusions). Explain exclusions by Amounts paid to any employee as reimbursement for expenses necessarily
completing the schedules on page 2 or on separate schedules attached to the and actually incurred in the performance of service and deductible as such by
return. the employer;
ATTACH COPIES OF FEDERAL SCHEDULES TO SUPPORT ALL ENTRIES Compensation received for service in the armed forces of the United States,
ON LINES 6, 7 AND 10 OF COLUMN I. including the reserves.
Subtract column II from column I and enter difference in column III. If there are DECEASED TAXPAYER
no exclusions in column II, use column III only. Support figures with schedules. Attach Federal Form 1310, or death certificate, if taxpayer or spouse is
Multiply the number of exemptions allowed by $600.00. Include the extra deceased.
exemptions allowed by Muskegon for an individual 65 or older, blind, deaf or
INSTRUCTIONS PAGE 2
TAXABLE AND NON-TAXABLE INCOME AND EXCLUSIONS
PART YEAR RESIDENT
M-1040TC - Tax Calculation Schedule allocated. Taxable income earned while a resident is reported in the Income
A PART YEAR RESIDENT WITH TAXABLE INCOME AS BOTH A RESIDENT Earned as a Resident column. Taxable income earned while a non-resident is
AND A NON-RESIDENT, must use Form M-1040TC, Tax Calculation reported in the Income Earned as a Non-resident column. Non-taxable income
Schedule, to calculate the liability. and excludable income as either a resident or non-resident is reported in the
Excludable Income Adjustments and Deductions column. Use the instructions
A part year resident who has taxable income only as a resident or non-resident for residents and non-residents as a guide to allocate income.
may file using the regular M-1040 form including an explanation on Schedule J,
page 2, stating: Part year resident with taxable income only as a resident (non- Follow the instructions on Form M-1040TC. If questions arise, phone the
resident). The tax rate for taxable income as a resident is 1% (.01). The tax Income Tax Department at (231) 724-6770.
rate for taxable income as a non-resident is 0.5% (.005). NOTE: Copies, schedules and other documentation supporting exclusions,
Allocation of Income on Form M-1040TC adjustments and deductions must be attached. Failure to attach schedules and
documentation or attaching incomplete or incorrect schedules and
Income is allocated according to the residency status for each item of income. documentation will delay the processing of your return or result in deductions
Adjustments and deductions must be allocated in the same way income is being disallowed.
RESIDENT
LINE 1 - Wages, Salaries, Tips, etc. LINE 9 - Pensions and Annuities
A resident is taxed on ALL earnings, including salary, bonus, separation and Enter on line 9 - column I, the pension and annuities reported on Federal Form
incentive payments, tips, commissions and other compensation for services 1040 or Form 1040A.
rendered, REGARDLESS WHERE EARNED. EXAMPLE: Taxpayer lives in the
City of Muskegon but works in Norton Shores and receives his paycheck from the Annuity distributions are excludable. Pension distributions qualifying as
home office in New York City, 100% of the compensation is taxable. retirement benefits are excludable. Early distributions from a pension plan are not
excludable.
Report, on line 1 column I, the amount of wages, salaries, tips, etc. from Federal
Return. (Form 1040, form 1040A, Form 1040EZ). LINE 10 - Supplemental Income
Military pay and supplemental unemployment benefits are NOT taxable. (Exclude Enter on this line in column I, the total amount shown on the Federal Return,
on page 2 Schedule A, line 3). Form 1040.
Attach W-2 forms for all compensation or list the employers who did not withhold Support exclusions with Schedule H, page 2 and by attaching Federal Schedules
Muskegon tax in Schedule J. E and/or F. Exclude undistributed share of Sub-Chapter S corporation income.
Losses from passive activities are treated the same as on Federal Form 1040.
A taxpayer, who was a resident part of the year and lived and worked outside the
City the balance of the year, shall be taxed only on his earnings while a resident. LINE 11 - Unemployment Compensation
LINE 2- Interest Enter on line 11, column I, the Unemployment Compensation reported on
Federal Form 1040 or Form 1040A. Exclude Unemployment compensation in
Interest is taxable the same as on the Federal return except interest on column II. It is not taxable.
U.S.Bonds, Treasury Bills and notes is excluded. LINE 12 - Social Security
Report on line 2, column 1, the amount of taxable interest income from Federal
Return. I (Form 1040, Form 1040A or 1040EZ) Exclude interest from U.S. Bonds Enter on line 12, column I, the Social Security benefits reported on Federal Form
and Treasury Bills and notes on page 2, Schedule B, line 1. 1040 or Form 1040A. Exclude Social Security in column II. It is not taxable.
LINE 3 - Dividends LINE 13 - Other Income
Dividends are taxable. Report on line 3, column I the amount of dividend income Enter on line 13, column I, the other income reported on Federal Form 1040.
from Federal Return. (Form 1040 or Form 1040A) Also report on line 3, column I Income items included on this line would be gambling winnings, jury duty and
any Sub-Chapter S distributions. (Sub-Chapter S distributions are dividends other miscellaneous income. Identify the source of other income on Schedule J,
subject to Muskegon Income Tax) page 2. Ordinary income from Federal Form 4972, special averaging methods, is
taxable, attach schedule.
Exclude margin interest paid on page 2, Schedule C, line 1. Exclude bingo winnings and other miscellaneous income which is not taxable in
LINE 4 - Refunds, Credits and Offsets column II. Document exclusions on Schedule J, page 2 or attach a separate
Report on line 4, column 1, the amount of taxable refunds, credits or offsets from schedule.
Federal 1040. Exclude the amount from column I in column II as refunds, credits LINE 14 - Adjustments and Deductions
and offsets that are not taxable by Muskegon. Enter in column III the total adjustments and deductions from page 2, Schedule I,
LINE 5 - Alimony Received line 6. Attach a copy of IRA contribution receipt to support an IRA contribution
Report on line 5, column I, the amount of alimony received as reported on adjustment. Attach a copy of Federal Form 3903 to support moving expenses
Federal 1040. adjustment. Provide amount paid, name, address, and social security number of
recipient to support employee business expense adjustment. Document other
LINE 6 - Business Income adjustments and deductions on Schedule I or attach other supporting
All self employment income is taxable. Report on line 6, column I, the total documentation or schedules. The following Federal adjustments are not allowed
business income from Federal 1040. under the Muskegon Income Tax Ordinance: student loan interest deduction,
Archer MSA deduction, Self-employed health insurance deduction, one-half or
Adjustments must be made for job credits, additional depreciation due to self employment tax, and penalty on early withdrawal of savings.
investment credits and meal and entertainment expenses. (see page 2 Schedule
D) The City of Muskegon must approve your "Renaissance Zone Tax Exempt
Status" before a tax return is filed with our department. A copy of the
LINE 7 - Sale or Exchange Property Renaissance Schedule RZ 1040 must accompany the tax return.
Report on line 7, column I, the total long and short term capital gains and losses Enter the Renaissance Zone deduction from Schedule RZ 1040. (qualified
from Federal 1040. Renaissance Zone individuals only)
The portion of the gains and losses occurring before July 1, 1993 are excludable. LINE 21 - Credit for Tax Paid to Another Michigan City
Use Schedule F, line 1a or if there is more than one sale or exchange, attach a
separate schedule to document exclusion. The exclusion shall be computed from A resident may claim a credit for income tax paid to another Michigan city. The
difference between the purchase price and fair market value at July 1, 1993 credit for tax paid to the other city is based upon income that is also taxable in
(June 30 closing price for traded securities or by prorating the gain or loss on the Muskegon. The credit allowed is the tax paid to the other city or 0.5% (.005) of
basis of total months held to months in the non-taxable period. Include gains or the amount earned in that city during 2005 less exemptions allowed by the
losses from Federal Form 4797. Muskegon Income Tax, whichever is smaller. Proof of payment to another city
must be submitted. Attach a copy of the return filed with the other city. No credit
LINE 8 - IRA Distributions is allowed for tax paid to a city in another state. (Refer to worksheet on the back
Enter on line 8, column I, the IRA distributions reported on Federal Form 1040 or of M-1040-TC).
Form 1040A.
Exclude, in column II IRA distributions qualifying as retirement benefits.
Premature IRA distributions are not excludable. ROTH rollover distributions are
excludable.
INSTRUCTIONS PAGE 3
NON-RESIDENT
LINE 1 - Wages, Salaries, Tips, etc. losses from property located in Muskegon occurring prior to July 1, 1993. See instructions
Enter in column I the amount from Federal Form 1040, Form 1040A, or Form 1040EZ. under "Resident" for methods of prorating Muskegon gains and losses.
Enter in column II the excludable wages, salaries and tips. A non-resident is taxed on An estate or trust is required to pay the tax for a non-resident beneficiary and such income
earnings received for work done or services performed in the City of Muskegon. The is excludable on the Individuals Muskegon Return.
excludable portion of compensation paid to a non-resident for work performed for an LINE 8 - IRA Distributions
employer both inside and outside of Muskegon is computed on Schedule A, lines 1a Enter in column I the amount from Federal Form 1040 or Form 1040A.
through 1g. The exclusion is based on the percentage of time worked in and out of
Muskegon. Vacation and sick time are not included in total days worked in arriving at Exclude in column II all IRA distributions except premature distributions previously
this percentage. Compensation for vacations, holidays, sick time, bonuses, and deducted from income subject to Muskegon tax.
separation or incentive retirement payments is taxable on the same ratio as normal LINE 9 - Pensions and Annuities
earnings. The percentage of compensation may be computed on the basis of days, hours
or dollars of commission. A separate schedule must be completed to allocate wages from Enter on line 9, column I, the pension and annuities reported on Federal Form 1040 or
each employer. Form 1040A.
Attach W-2 forms showing all wages and Muskegon tax withheld. Exclude in column II, annuity distributions and pension distributions qualifying as
retirement benefits. Early distributions from a pension plan are not excludable if related
Use Schedule A, line 2 to explain exclusion of wages earned entirely outside of Muskegon. compensation was subject to Muskegon tax.
Part Year Residents see Part Year Resident Instructions on page 3 and use form M- LINE 10 - Supplemental Income
1040TC to calculate taxable income and tax due. Report in column I, the amount from Federal 1040.
LINE 2 - Interest Exclude in column II the portion of income or loss from rental units outside the City of
NOT TAXABLE, leave blank. Muskegon, partnerships business activity outside the city, Sub-S corporations and farming
LINE 3 - Dividends activity outside the city. Support the exclusions by attaching a copy of Federal Schedule E
and/or Schedule F. Losses on passive income are treated the same as on Federal Form
NOT TAXABLE, leave blank 1040.
LINE 4 - Refunds, Credits and Offsets LINE 11 - Unemployment Compensation
NOT TAXABLE, leave blank. NOT TAXABLE, leave blank.
LINE 5 - Alimony Received LINE 12 - Social Security Benefits
NOT TAXABLE, leave blank. NOT TAXABLE, leave blank.
LINE 6 - Business Income LINE 13 - Other Income
Report in column I the amount from Federal 1040. See instructions under "Resident". ESOP payments and stock savings plans are taxable in
See "Resident" Instructions on page 3 for adjustments to business income. proportion to taxable wages. Miscellaneous income for services performed outside the City
If the business activity is not entirely within the City of Muskegon, use Schedule D on page of Muskegon is excluded. Identify and explain exclusions on Schedule J.
2 to compute the excluded Business Income. Use Schedule E to compute the Business LINE 14 - Adjustments and Deductions
Allocation Percentage. See instructions under "Resident".
In determining the Business Allocation Percentage, a factor shall be excluded from the If your earnings from line 1 have been allocated through use of the percentage from
computation only when such factor does not exist anywhere. In such cases, the sum of the Schedule A. line 1d use same percentage to allocate the related adjustments. Explain
percentages shall be divided by the number of factors actually used. allocations on Schedule J.
LINE 7 - Sale or Exchange of Property An IRA deduction is only allowable for individuals with Muskegon earned income to the
Report in column I the amounts from Federal 1040. Exclude on Schedule F the portion of extent the income is subject to the Muskegon tax.
gains or losses from property located outside of Muskegon and the portion of gains or Part Year Residents must allocate adjustments the same way they allocate income.
ALL TAXPAYERS
PAYMENTS AND CREDITS ASSISTANCE
LINE 19 - Total Tax Withheld by Employers If you have any questions not answered in these instructions, or if you need assistance in
Enter total Muskegon tax withheld as shown on city or local copy W-2 forms. ATTACH preparing your return, call (231) 724-6770 or visit the Income Tax Department, Room 105,
COPIES OF ALL W-2 FORMS and be sure the total Muskegon tax withheld agrees with City Hall, 933 Terrace Street, Muskegon, Michigan.
line 19. Round to the nearest dollar. NOTE: We will not prepare your return.
LINE 20 - Payments on 2005 Declaration of Estimated Tax DECLARATION OF ESTIMATED TAX
Take credit for all estimated Muskegon Income Tax payments made for 2005 including last If your 2006 Muskegon Income not subject to withholding is expected to be more than
payment due in January 2006. $10,000 for a resident or more than $20,000 for a non-resident (after deduction of
LINE 22 - Other Tax Credits exemption credits) on which the tax will be over $100.00, you must file a Declaration of
Estimated Tax for 2006 by May 1, 2006 and pay at least one-fourth (1/4) of the estimated
Enter tax paid on your behalf by a partnership of which you are a partner, or payments 2006 tax with your Declaration.
made on a tentative return. The balance of the estimated tax, is due in three equal installments to be paid by June 30,
TAX DUE OR REFUND 2006, October 2, 2006 and January 31, 2007. You may amend your estimate at the time
of making any quarterly payment.
LINE 24 - Balance Due Credit for a 2005 overpayment may be applied to your 2006 estimated tax. Other
Tax due of one dollar ($1.00) or more must be paid IN FULL WHEN THE RETURN IS overpayments are refunded by check, or donated to the D.A.R.E. Program.
FILED. Tax due of less than $1.00 need not be paid. A Declaration of Estimated Tax form may be obtained by calling (231) 724-6770 or
Make check or money order payable to CITY OF MUSKEGON. stopping at the Income Tax Department.
NOTE: IF YOUR PAYMENT IS OVER $100.00, YOU MAY BE REQUIRED TO FILE A No estimate is required if 70% of current or prior years tax is paid by withholding or
DECLARATION OF ESTIMATED INCOME TAX, FORM M-1040ES. SEE ESTIMATED another tax credit.
TAX INSTRUCTIONS. PENALTY AND INTEREST WILL BE CHARGED IF YOU HAVE
NOT FILED A REQUIRED ESTIMATE OR IF YOUR ESTIMATES ARE UNDERPAID. PENALTY AND INTEREST WILL BE CHARGED IF YOU HAVE NOT FILED A
REQUIRED ESTIMATE OR IF YOUR ESTIMATES ARE UNDERPAID.
CHARGES FOR LATE PAYMENTS
LINES 25, 26 and 27 - Overpayment All tax remaining unpaid at the time a return is filed or after the due date, whichever date is
Overpayment of less than one dollar ($1.00) will not be refunded and cannot be donated. earlier, is subject to penalty and interest. The penalty is 1% per month, not to exceed a
All other overpayments will be refunded or may be donated to the D.A.R.E. Program, or total penalty of 25%. The interest rate is 1% above the prime rate on an annual basis.
credited to the 2006 estimated tax liability. To donate the overpayment, check the donation
box on line 25 and enter the overpayment. To claim a refund enter the overpayment on The minimum charge for penalty and/or interest is $2.00
line 26a. Complete lines 26b through 26d if you want us to directly deposit the amount NOTE: Copies of federal schedules and/or other documentation explaining and supporting
shown on line 11a into your checking or savings account at a bank or other financial exclusions, adjustments and deductions must be attached to the return. Failure to attach
institution (such as a mutual fund, brokerage firm, or credit union) instead of sending you a schedules and documentation or attaching incomplete or incorrect schedules and
check. NOTE: If you do not want your refund directly deposited into your account, leave documentation, will delay processing of the return or result in deductions being disallowed.
lines 26b through 26d blank. Enter the overpayment on line 27 if you want it credited to
your 2006 estimated tax liability.
Refunds will be made as quickly as possible. Please allow 45 days before making an
inquiry.
INSTRUCTIONS PAGE 4