Q: My spouse and I are retired and file jointly for the Michigan income tax return. Whose age is used when filing jointly?
A: Always use the age of the older spouse for the Michigan tax return.
Q: What is the Michigan tax rate for 2022?
A: The tax rate for 2022 is 4.25%.
Q: My dad received a corrected 1099-INT showing an additional $9 in interest income. Does my dad have to file an amended tax return to include the $9?
A: No, he does not have to file an amended return due to the de minimis rule because the increased taxable amount is less than $10.
Q: My dad died in 2021 and had no beneficiaries on his 401(k)retirement plan. What happens to the money? Are there any tax liabilities?
A: If there are no beneficiaries then the estate of your dad becomes the beneficiary. You need to contact the trustee of the 401(k) plan to explore your options. In most 401(k)retirement plans the only option is a 100% distribution to the estate of the decedent with the beneficiaries splitting the money. All distributions from a 401(k)retirement plan are subject to ordinary income tax except for any after-tax contributions. If the estate assets are large enough then there could be an estate tax in addition to the ordinary income tax.
Q: My husband and I bought a vacation home in Florida in 2021 and sold it in 2022 for a $11,000 loss. Can we deduct this loss?
A: No, losses on personal real estate are not deductible.
Q: I have saved my tax records for the last 25 years. The paperwork is piling up and I want to know what I can throw out? I am concerned that the IRS will ask for a document that I do not have because I trashed it. How long do I need to keep my tax records?
A: The IRS has three years to audit your return from the filing date and six years if it believes that you under-reported your gross income by more than 25%. All investment records (stocks, bonds, real estate, business ownership, etc.) should be kept for six years after the sale of the investment. Any records for non-deductible IRA contributions on form 8606 should be kept indefinitely.
Q: I am recently divorced and paid child support and alimony in 2022. What can I deduct on my tax return?
A: Alimony is deductible but child support is not.
Q: What is the full retirement age (FRA) for Social Security benefits?
A: Anybody born before 1955 will have a FRA of 66. Anybody born after 1959 will have a FRA of 67. Anybody born in 1955 through 1959 will have a FRA that starts at age 66 plus two months and increases by two months for each year till 1959 A person could receive Social Security benefits at age 62 but the benefits would be permanently reduced by 25% for people with a FRA of 66 and reduced by 30% for people with a FRA of 67.
Q: I am 73 years old and I have never taken a distribution from my IRA. Do I have to take a mandatory distribution at a certain age?
A: Assuming that you have a traditional IRA, you must take the first distribution by April 1st in the following year after age 72. In your case, you should have taken at least one distribution.
Q: My wife and I own a brokerage account jointly. If both of us die what happens to the assets of our brokerage account?
A: The brokerage account would belong to the estate of the last person to die. In the case of simultaneous death, a “will” can specify who the last person is. A brokerage account may have a “trust” title and upon death the trust document takes over. If you do not have a “trust” or a “will” then you can set up a TOD(transfer on death) designation on the brokerage account to name your beneficiaries. The TOD will override any named beneficiaries in your “will” or “trust”. Additionally, the TOD will avoid the probate process.
Q: Can I reimburse myself from my Health Savings Account (HSA) for qualified medical expenses that I paid out-of-pocket. Is there a time limit? Do I need to reimburse myself in the same year?
A: There is no time limit and the reimbursement does not have to be in the same year as the medical expense. As long as you had your HSA established at the time of the medical expense and it was not reimbursed, you can pay yourself from your HSA, even years later.
Q: Can I claim my cousin as a dependent if he has no income and I pay for his living expenses and he lives in my house.
A: Yes, you can as long your cousin is not a dependent of another person. Many filers think only young children can qualify as dependents — and they miss out on big deductions as a result. Qualified dependents may include parents, grandchildren and even non-relatives who made less than $4,400 in income during the tax year.
Q: What is the $16,000 gift rule? I am considering giving $9,000 to my brother. Do I get a deduction for my gift?
A: You can gift-give up to $16,000 annually to any person without triggering a gift tax. If you are married and your spouse is in agreement, you can double the annual gift to $32,000. You do not get a deduction and the recipient does not declare the gift as taxable income.
Helpful telephone numbers for any tax concerns:
• IRS Help (800)829-1040 • MI Help (517)636-4486
• IRS Forms (800)829-3676 • MI Forms (517)636-4486
• IRS Refund Info. (800)829-4477 • MI Refund Info. (517)636-4486
Richard Rysiewski, a Certified Financial Planner®, welcomes all questions on tax and financial matters. Please send to Richard Rysiewski, Financial Doctor, 3001 Hartford Lane, Shelby Twp., MI 48316 or call (248) 651-7710.