Correction: This story has been updated to correct the nonresident city income tax rate.
Detroit taxpayers can now do something they’ve never done before — file their city income taxes electronically.
City officials hope the new filing process also prompts between 80,000 to 100,000 taxpayers to do something else they haven’t been doing before — filing their taxes at all.
“How do you know how many people haven’t been paying?” asked Deputy Mayor Carol O’Cleireacain, adding the estimate is based on figures from the IRS. “We know a lot of them have not been filing, or if they have been filing, they have not been telling us the right amounts.”
This is the first year the state of Michigan will collect the 2.4 percent city income tax for residents and the 1.2 percent commuter tax on non-residents who work in Detroit, via a filing schedule included with state tax returns.
O’Cleireacain said the state’s software would check addresses to prompt Detroit residents to complete the city portion of the return, but adding the ability to check whether a filer is required to pay the commuter tax will take longer. The state and federal tax-filing season opened Tuesday.
Detroit collects about $250 million in annual income taxes, and the city’s post-bankruptcy plan of adjustment assumes that revenue will increase 2.3 percent a year, which would be close to $6 million. Asked for her approximation of how much extra cash the new filing arrangement might add to city coffers, O’Cleireacain would say only, “I hesitate to estimate.”
Another change is that the city’s income tax deadline will move from April 30 to April 18 this year, to match the Tax Day deadlines for city and federal taxes. O’Cleireacain added she hadn’t been able to discover why the city originally instituted the later filing date.
The city also will stop accepting cash to pay income tax bills.
Taxpayers won’t be able to electronically pay tax bills, so they’ll have to mail a check or money-order. Residents who want to continue filing a paper return can do so, but they’ll need to mail it to Lansing, not City Hall. Taxpayers will be able to check the status of their refunds online with the state. Refunds — which have been known to show up in October or even into the next year — are expected to be faster, however those checks can’t be directly deposited into the taxpayers checking account.
Ramping up Detroit’s tax collections was expected to be an important part of a comprehensive restructuring at City Hall, which has remained mired in paper-based purchasing and financial procedures that are decades out of date. Having the state collect personal income taxes is the first step. Corporate tax collection will move to the state for the 2016 filing year.
Detroit is one of about 20 cities in the state with its own municipal income tax, and becomes the first to use the state treasurer’s office to handle filing.
The city will pay the state $5.7 million for tax services, but won’t be disbanding Detroit’s tax department, which will handle corporate taxes this year, as well as disputes and collections for tax years earlier than 2015. The city tax department also will move to start conducting audits, O’Cleireacain said.
Taxpayers can get information on filing at www.michigan.gov/citytax or by calling the state treasury department at (517) 636-5829. State tax officials will be on hand to provide assistance on the ground floor of the Coleman A. Young Municipal Center downtown at 2 Woodward. An electronic tax kiosk will also be added to the municipal center.
In addition, the Accounting Aid Society will provide help at several locations, including at City Hall on Mondays, Wednesdays and Fridays, starting on Monday. Taxpayers who want help from the society must make an appointment by calling: 313-556-1920.
As for electronic filing, taxpayers with taxable income of up to $62,000 can file for free, as they can with federal returns. Filers with taxable income of more than $62,000 can file electronically for as little as $9.95.