MI1040CR Question

[Nighthawk]

Need opinions on this example. Independent student at college.

Student had to declare independent for Stafford eligibility.

Student was close enough to eat at parents house.

Wages 700.....Interest 20

Tuition Fees 4000.......Stafford loans 9000 for tuition,housing,etc

Rent 2800

No federal tax due

No MI tax due

Prop tax credit for rent paid ???

Should household income include the nontaxable stafford loans?

If not included, there is no means to show how rent was paid.

Thanks for any opinions.

[LindaB]

Prop tax credit for rent paid ???

Should household income include the nontaxable stafford loans?

If not included, there is no means to show how rent was paid.

Thanks for any opinions.

Loan proceeds are not to be included in household income, according to the instructions. I had a similar one last year, I ended up having her mail it with a statement, as I couldn't find in the program a place to add a statement to the MI efile.

[taxtrio]

Did parents contribute to students household expenses? If so, the amount of gift over 300.00 would go on the other

nontaxable income line in computing the credit. If not a note explaining the fact that student lived off of student loans

should be sufficient. I believe there is a place to make a note for Michigan at the bottom of the MI efile screen.

You can also make a note on the Federal efile screen, tab at bottom. They may, or may not read it. But if they deny the

rent credit then it is easier to get the credit released, just refer to note attached. (They may eventually ask for documentation of the amount of loans, they can be picky that way).

And don't forget the file for the Heat Credit (1040-CR7) while you are at it.

Need opinions on this example. Independent student at college.

Student had to declare independent for Stafford eligibility.

Student was close enough to eat at parents house.

Wages 700.....Interest 20

Tuition Fees 4000.......Stafford loans 9000 for tuition,housing,etc

Rent 2800

No federal tax due

No MI tax due

Prop tax credit for rent paid ???

Should household income include the nontaxable stafford loans?

If not included, there is no means to show how rent was paid.

Thanks for any opinions.

[Nighthawk]

Thanks for the input.

We usually have 99% efiled, but this looks like a mail in return.

Thanks again.

[lbbwest]

Thanks for the input.

We usually have 99% efiled, but this looks like a mail in return.

Thanks again.

I would not mail the return. Nobody (VERY slight exaggeration.) I had a situation year before last; where the client purchased a home in bank foreclosure, the local taxing bureaus only allow recharacterization from commercial to primary homestead once a year. Client therefor paid a higher tax on her primary residence than the computer would have allowed based on millage and taxing authority. I called the practitioner hotline and was advised the efile the return as normal and wait for letter questioning the property tax credit. By the by in my 20+ years I've never had them ask WHERE the money came from to pay the rent or property tax credit. This is because the calculation is based upon taxable earnings not asset value, a flaw in the system. lbb

[taxtrio]

I would not mail the return. Nobody (VERY slight exaggeration.) I had a situation year before last; where the client purchased a home in bank foreclosure, the local taxing bureaus only allow recharacterization from commercial to primary homestead once a year. Client therefor paid a higher tax on her primary residence than the computer would have allowed based on millage and taxing authority. I called the practitioner hotline and was advised the efile the return as normal and wait for letter questioning the property tax credit. By the by in my 20+ years I've never had them ask WHERE the money came from to pay the rent or property tax credit. This is because the calculation is based upon taxable earnings not asset value, a flaw in the system. lbb

You have been very fortunate... Michigan does send out challenges to the CR, asking for documentation for everything.

They want to know "how did you live last year on so little income". These examinations are painful, detailed, and

usually take months, and months... be glad you have never had to help a client with one.