Form 446 - 2013 Michigan Income Tax Withholding Guide (Page 2 of 4) in pdf

Which Beneﬁ ts are Taxable

The withholding rate is 4.25 percent of any taxable pension

or retirement beneﬁ t. The taxable portion is determined by

Beginning in 2012, pension and retirement beneﬁ ts are taxed

subtracting any pension deduction and personal exemption

differently depending on the age of the recipient. For married

allowance. If you prefer to compute withholding directly, refer

couples that ﬁ le a joint Michigan income tax return, age is

to the Withholding Formula that follows.

determined using the age of the older spouse.

Monthly Non-Taxable Deduction Amounts for Persons Born

Military pensions, Social Security beneﬁ ts and railroad

During the Period 1946 and 1952:

retirement beneﬁ ts continue to be exempt from tax.

Single recipient pension deduction ............................ $1,666.67

For recipients born before 1946, the law remains the same as

Married recipient pension deduction ........................ $3,333.33

it was prior to 2012. Those born before 1946 may subtract

Personal exemption allowance....................................... $329.17

all qualifying pension and retirement beneﬁ ts received from

public sources, and may subtract qualifying private pension

Withholding Formula. Withholding = [Pension or Retirement

and retirement beneﬁ ts up to $47,309 if single or married

Payment subject to federal income tax – Monthly pension

ﬁ ling separate, or $94,618 if married ﬁ ling a joint return.

deduction – (Allowance per Exemption x Number of

Withholding will only be necessary on taxable pension

Exemptions)] x 4.25%

payments that are not qualifying pension and retirement

Example 1: A single retiree age 65 (born in 1948) receiving

beneﬁ ts (see Pension and Retirement Beneﬁ ts on page 1) and

$2,100/month with 1 exemption would have the following

qualifying private pension distributions that exceed the pension

withholding:

limits stated above for recipients born before 1946.

Recipients born during the period 1946 and 1952 are able to

[$2,100 - $1,666.67 - ($329.17 x 1)] x 4.25% = ($2,100 -

deduct $20,000 in pension and retirement beneﬁ ts if single

$1,666.67 - $329.17) x 0.0425 = $4.43

or married ﬁ ling separate or $40,000 if married ﬁ ling a joint

return. This exemption does not apply to payments from 457

Example 2: A married retiree age 62 (born in 1951)

plans, 401(k) plans, 403(b) plans or any other elective deferral

receiving $4,500/month with 2 exemptions would have the

plans if only the employee made contributions to the plan. If

following withholding:

the beneﬁ t is less than the deduction amounts, no withholding

is required unless the recipient requests withholding by

[$4,500 - $3,333.33 - ($329.17 x 2)] x 4.25% = [$4,500 -

submitting an MI W-4P.

$3,333.33 - $658.34] x 4.25% = $21.60

For recipients born after 1952, all pension and retirement

For further information and examples, go to Treasury’s Web

beneﬁ ts are taxable and subject to withholding.

site at

How Much to Withhold

In the absence of an MI W-4P, pension administrators shall do

Employer Income Tax Withholding. Determine the amount

one of the following:

of tax withheld using a direct percentage computation or

(1) Do not withhold on beneﬁ ts paid to recipients born before

the withholding tables provided on Treasury’s Web site at

1946 unless the beneﬁ ts exceed private pension limits.

The withholding rate is 4.25 percent

of compensation after deducting the personal and dependency

(2) If the recipient was born in 1946 or after, withhold on

exemption allowance.

all taxable pension distributions at 4.25 percent.

Other Withholding

Pension and Retirement Beneﬁ ts Withholding. Withholding is

required on taxable pension beneﬁ ts. The withholding rate is 4.25

Withholding

Nonresident Gambling

and Charitable

percent after deducting the personal exemption allowance claimed

Gaming Winnings. Michigan withholding is required on

on the MI W-4P. Use the applicable monthly withholding table

all reportable winnings by nonresidents at Michigan casinos,

from either the Pension Withholding Tables for those born in 1946

racetracks, or off-track betting facilities. Reportable winnings are

through 1952 or the Michigan Income Tax Withholding Tables

those winnings required to be reported to the Internal Revenue

(Form 446-T) to calculate the appropriate withholding. Pension

Service (IRS) under the IRC. To calculate Michigan withholding,

administrators should follow the directions from recipients on any

multiply the amount of reportable winnings by 4.25 percent.

MI W-4P received.

Include the amount withheld on the recipient’s Form W-2G.

For recipients born during the period 1946 and 1952, the

Beginning January 1, 2012, Michigan withholding is required

Pension Withholding Tables incorporate the deductions of

on winnings from charitable gaming if federal withholding is

$20,000 for single or married ﬁ ling separate, and $40,000

required. Charitable gaming licensees required to withhold

married ﬁ ling a joint return, assuming beneﬁ ts are paid

Michigan income tax will need to register for withholding.

monthly. If beneﬁ ts are paid other than monthly, withholding is

Fringe Beneﬁ ts. Reporting and withholding on fringe

only due on the amount that exceeds the recipients’ deduction

beneﬁ ts follows federal guidelines as provided in the Federal

amount. Recipients who indicate on the MI W-4P they are

Employer’s Tax Guide, Circular E. Examples of fringe beneﬁ ts

married (withhold as single) should have withholding computed

include 401(k) deferred compensation, proﬁ t sharing, and

as if they are single.

cafeteria beneﬁ t plans.

If you received a MI W-4P from a recipient who has checked

Supplemental Unemployment Beneﬁ ts. Any employer required

box 3, determine the amount of tax withheld using the direct

to withhold federal income tax from supplemental unemployment

percentage computation or the Pension Withholding Tables.

Form 446 - 2013 Michigan Income Tax Withholding Guide Page 2

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