JUNE 5, 2014 CONFERENCE CALL WITH TAX PROFESSIONALS AND SOFTWARE VENDORS

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1 JUNE 5, 2014 CONFERENCE CALL WITH TAX PROFESSIONALS AND SOFTWARE VENDORS Topic: 2014 Minnesota Property Tax Law Changes including Supplemental agricultural credit for taxes payable in 2014 Renter property tax refund increase Homestead credit refund increase Eligible property tax refund notification The conference call script is below. Supplemental Agricultural Credit Each homestead qualifying for an Agricultural Credit for 2014 taxes is eligible for a supplemental credit. This supplemental credit is the lesser of $205 or the net property taxes on the property, excluding the house, garage, and surrounding one acre of land. Software vendors and tax preparers will not need to do anything for clients who may qualify for this credit. Taxpayers who qualify for this credit will not need to do anything. They will receive a check from the Department of Revenue by October 15, Please note: For 2014 only, the Department of Revenue will administer the credit and a check will be sent. (In future years, the supplemental credit information will be included on annual property tax notices.) We have worked with the counties and checks will be issued to the primary homesteader. Unlike the property tax refund, relative agricultural homesteads do qualify for this credit. o A relative homestead is when a qualifying relative who occupies the property receives homestead status. o For this purpose, qualifying relatives include the owner s or their spouse s grandchildren, children, siblings, or parents. The counties will identify taxpayers who qualify for the credit. They will also provide the Department with the dollar amount of the credit. June 5, 2014 Conference Call with Tax Preparers and Software Vendors 1

2 Any questions about the program, such as who qualifies and the credit amount, will be handled by the county where the taxpayer resides. The credit cannot be paid for any property that has delinquent property taxes. When county auditors prepare 2015 property tax notices, they will indicate on the statement that the taxpayer may have received a supplemental credit The credit does not affect the amount of taxes a property owner must pay to the county in November The credit must be subtracted from taxes otherwise payable when the property owner completes their 2014 income tax return. Increases in the Renter s Property Tax Refund and Homestead Credit Refund These refunds are both claimed on the 2013 Form M1PR. For renter property tax returns based on rent paid in 2013, there is a 6% increase to the refund. For regular homestead credit returns based on taxes payable in 2014, there is a 3% increase to the refund. For special homeowner refunds, there are no changes to the refund. Software Vendors: On May 22, we notified software vendors of the new renter and homeowner schedule. By now, you should have made changes to your software. Yesterday a new error code was put in place. The information is available on our website. Click the Software Vendors link in the Tax Professionals column Click on Forms, Specs, and Schemas tab Click on Property Tax Refund Note the renter and homeowner schedule final dates of 5/27/14 Effective immediately, returns submitted without these changes will be rejected. ERC Rule 0995 has been implemented. The rule states If Line 9 is significant it must equal the table look up amount using Line 8 and Line 9, if Line 14 is significant it must equal the table look up amount using Line 8 and Line 13 If you have any questions please contact us at Efile.DevSupport@state.mn.us or call June 5, 2014 Conference Call with Tax Preparers and Software Vendors 2

3 Tax Preparers: If you are a tax preparer, make sure you accept and install any updates from your software vendor. If you don t, any property tax returns you submit will not reflect the rate change and will be rejected. Forms and instructions on our website have also been updated and are available now. How this change affects the taxpayer: If the taxpayer has already filed a 2013 M1PR If the taxpayer has not filed a 2013 M1PR Then they don t need to do anything. We will review the return and increase the refund by the appropriate percentage Starting today they can go ahead and file. We have updated our instructions and tables to reflect the percentage changes. We will send a letter to the taxpayer explaining the increase and their new refund amount. As a reminder, taxpayers have until August 15, 2015 to file for a 2013 Homestead Credit Refund or Renter s Property Tax Refund. Here are dates that we ask taxpayers to file by to get their refund as soon as possible. If you re a You could receive up to You should file by To get your refund by How to file Renter and your total household income for 2013 is less than $57,170 $2,120 Aug. 15, 2014 (Filing deadline is Aug. 15, 2015) Oct. 15, 2014 File electronically through a tax preparer or tax prep software (fees may apply) Mail a paper Form M1PR Homeowner and your total household income for 2013 is less than $105,500 $2,657 Aug. 15, 2014 (Filing deadline is Aug. 15, 2015) October 15, 2014 File electronically for free through our website File electronically through a tax preparer or tax prep software (fees may apply) Mail a paper Form M1PR June 5, 2014 Conference Call with Tax Preparers and Software Vendors 3

4 Next year, when you help clients their 2014 tax returns, you may want to review the 2013 property tax return with them. Then you can amend their return if appropriate. Homestead Credit Refund Eligibility Notification A 2013 law requires the Department of Revenue to notify taxpayers who may qualify for a homestead credit refund but have not filed for one by September 1 of this year. By that date we will notify individual homeowners who may be eligible for a homestead credit refund for To determine if a homeowner may be eligible, we will review their 2013 individual income tax information and complete an estimate of their potential refund. If the estimated refund is at least $1,000 and the taxpayer has not filed for a homestead credit refund in the last two years, we will send a letter to advise them they may qualify for a 2013 refund. Software Vendors: You do not need to do any programming for this. However, you may see an increase in property tax refunds completed. Tax Preparers: You may see an increase in clients who would like to complete a property tax refund. Federal Conformity Update (Middle Class Tax Cuts) On March 21, 2014, the legislature passed a law retroactively adopting most of the federal changes to the Internal Revenue Code for tax year We updated our forms and instructions on April 2, and we continue to review returns that were before that date. About 1.1 million income tax returns filed after April 2 were filed with the new tax law changes. 260,000 returns were filed before April 2 and qualified for the middle class tax cuts, but needed to be reviewed. We have approximately 18,000 returns left to review. As a reminder, 1 of 3 things will happen after our review: 1. We will adjust the return, if possible. We will send the taxpayer a letter explaining the adjustment and send them a refund. 2. We will request more information from the taxpayer. We will use that information to adjust their return, if possible. We will send the taxpayer a letter explaining the adjustment and send them a refund. 3. If we cannot adjust the taxpayers return, we will notify them. They will need to file an amended return to get the benefits of these tax law changes. June 5, 2014 Conference Call with Tax Preparers and Software Vendors 4

5 Please note: If a taxpayer s 2013 Minnesota Income Tax Return was affected by federal conformity and they filed for a property tax refund before April 2, we will not be able to adjust their return. As you know, renter s and homeowner s property tax refunds are partly based on household income. Many different kinds of taxable and nontaxable income are included when computing household income for these refunds. We have no way of knowing whether additions related to federal nonconformity were included among those items on the return filed by the taxpayer. Therefore, anyone who filed for a property tax refund before April 2 may need to amend their return to receive the benefits of the March 21 law changes. Before filing an amended homeowner s or renter s return, taxpayers should make sure their income tax return has been adjusted to reflect the March 21 tax law changes. This will ensure they use accurate income information on the amended return and receive the maximum refund they are entitled to. We will complete our review of income tax returns affected by the March tax law changes on June 26. If a taxpayer has not heard from us by then, we do not believe their return was affected by the changes. Again, please wait to file the amended property tax return until you know the income tax return has been adjusted. This will ensure the return is completed with current income information and will maximize the refund. We would like to thank the software vendors and the preparers for working with us through this process. Taxpayer Communication Our next step will be to provide this information to all taxpayers. Our communication will range from general overviews to specific details about the increases to property tax refunds and the supplemental ag credit. We will also tell taxpayers about the various letters they could receive from us. All of the things we talked about today have different requirements and implementation schedules. As a result, a taxpayer could receive multiple notifications from us. Depending on the taxpayer s situation, they could receive some, all, or none of them. June 5, 2014 Conference Call with Tax Preparers and Software Vendors 5

6 Due to the types and timing of the changes, we cannot combine these notifications. Here is a chart showing the letters a taxpayer may receive and why they may receive them: Type of Letter Timing of Letter (for most returns) * Tax Law Change (March 21, 2014) Indicates that we adjusted their 2013 income tax return, need more information, or cannot adjust the return. Supplemental Agricultural Credit Tells eligible farmers (primary homesteaders) that they will receive the supplemental agricultural credit. Increase in Homestead Credit Refund or Renter s Property Tax Refund Notifies taxpayers who filed by June 4 that we ve increased their property tax refund due to a new law. Homestead Credit Refund Eligibility Notifies homeowners who did not file a Homestead Credit Refund return in 2013 that they may be eligible for a refund of $1,000 or more. Request for More Information Requests more information, when needed, from taxpayers who filed for a Homestead Credit Refund (for Homeowners) or Renter s Property Tax Refund. Tax Order Notifies taxpayers that we adjusted their return for the Homestead Credit Refund (for Homeowners) or Renter s Property Tax Refund. Includes information about their right to appeal. April 2 June 30, 2014 September 18 September 23, 2014 July 7 July 25, 2014 (Renters) August 4 September 9, 2014 (Homeowners) August 19 August 27, 2014 June 1 November 1, 2014 June 1 November 1, 2014 Ongoing activity based on when the return is filed Offset Letter Notifies taxpayers who owe a tax or other government debt that we may take their property tax refund and apply it to the debt. June 1 October 30, 2014 Ongoing activity based on when the return is filed *Note: As returns are filed throughout the year, we will send these letters at other times as needed. Reminders Information about the legislative changes will be posted on our website You can also sign up for notifications As always, please encourage direct deposit This concludes this portion of the conference call. We will now open it up for questions. June 5, 2014 Conference Call with Tax Preparers and Software Vendors 6