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Use the Exclusions and Adjustments to Other Gains or (Losses) 3. Benefits paid from a retirement annuity policy other than annuitized
schedule to compute exclusions and adjustments to other gains and benefits paid over the life of the individual are taxable to the same
losses reported on your federal income tax return. extent taxable under the Internal Revenue Code.
Line 9 –IRA Distributions Report taxable pension and retirement income on line 10, column C.
In column A enter the IRA distributions reported on federal Form 1040. Line 11 – Rental Real Estate, Royalties, S Corporations, Partner-
Premature IRA distributions (Form 1099-R, box 7, distribution code 1) ships, Royalties, Estates, Trust, Etc.
Exclude in column B, IRA distributions qualifying as retirement benefits: All income reported on federal Schedule E may be taxable. A resident’s
IRA distributions received after age 59½ or described by Section 72(t) share of an S corporation’s flow through income is not taxable. Report
(2)(A)(iv) of the IRC and all other excludible IRA distributions. The this income on line 11, columns A.
Exclusions and Adjustments to IRA Distributions schedule is used to Line 12 – Subchapter S Corporation Distributions
document excluded IRA distributions. S corporation distributions received by a resident from the corporation’s
Line 10 –Taxable Pension Distributions Accumulated Adjustments Account, Other Adjustments Account and/or
Enter on line 10, column A, pension and annuities reported on the Shareholder’s Undistributed Taxable Income Previously Taxed
federal Form 1040. Excluded pension and retirement benefits are Account (federal Form 1120S, Schedule M-2, line 7) are income on a
reported on line 10, column B and explained on the Exclusions city return and are to be reported on this line. These distributions are
and Adjustments to Pension Distributions schedule. found on federal Schedule K-1 (1120), line 16. Report these
Pension and retirement benefits from the following are not taxable: distributions on the Adjustments for Tax Option Corporation (like
1. Pension plans that define eligibility for retirement and set contribution Subchapter S Corporation) Distributions schedule. Also attach copies
and benefit amounts in advance; of federal Schedule K-1 (Form 1120S).
2. Qualified retirement plans for the self-employed;
3. Distributions from a 401(k) or 403(b) plan attributable to employer Line 13 – Farm Income (Or Loss)
contributions or attributable to employee contributions to the extent Profit or loss from the operation of a farm is taxable as reported on the
they result in matching contributions by the employer; federal return regardless of where the farm is located. There are no
4. Benefits from any of the previous plans received on account of exclusions. Attach a complete copy of federal Schedule F.
disability or as a surviving spouse if the decedent qualified for the Line 14 – Unemployment Compensation
exclusion at the time of death; NOT TAXABLE. Exclude all. No explanation needed.
5. Benefits paid to an individual from a retirement annuity policy that has Line 15 – Social Security Benefits
been annuitized and paid over the life of the individual. NOT TAXABLE. Exclude all. No explanation needed.
Pension and retirement benefits from the following are taxable: Line 16 – Other Income
1. Premature pension plan distributions (those received prior to Other income reported on the resident’s federal return is taxable except
qualifying for retirement); for income from recoveries related to federal itemized deductions from
2. Amounts received from deferred compensation plans that let the prior tax years. Report on this line a net operating loss carryover from
employee set the amount to be put aside and do not set retirement the previous tax year. Complete report exclusions and adjustments on
age or requirements for years of service. These plans include, but are p.2, using the Line 16 - Exclusions and Adjustments to Other
not limited to, plans under IRC Sections 401(k), 457 and 403(b): Income schedule.
• Amounts received before the recipient could retire under Line 17 – Total Additions Add lines 2 through 16.
the plan provisions, including amounts paid on Line 18 – Total Income
separation, withdrawal or discontinuance of the plan; Add lines 1 through 16 of each column and enter amounts on line 18.
Amounts received as early retirement incentives, unless
the incentives were paid from a pension trust; Line 19 – Deductions
Enter amount from Deductions schedule, page 2, line 7.
NONRESIDENTS
NONRESIDENT INCOME SUBJECT TO TAX:
1. Compensation for work done or services performed in the city, which and listed, by employer, on the Excluded Wages schedule on page 2 of
includes, but is not limited to, the following: salaries, wages, bonuses, the tax form on line 1-10. On the Excludible Wages, Salaries, Tips, Etc.
commissions, fees, tips, incentive payments, severance pay, vacation schedule, lines 7 and 8, list the reason the wages are excludible and the
pay and sick pay. address of the work station where work was performed for the employer.
2. Net profits of from the operation of an unincorporated business, Do not use box 18 of W-2 form to report taxable wages or to
profession or other activity attributable to business activity conducted allocate wages: use box 1 wages only. A separate wage allocation
in Muskegon, whether or not such business is located in Muskegon. must be completed for each employer. Wages are normally allocated
3. Gains or losses from the sale or exchange of real or tangible personal using the actual number of days or hours worked in and outside the city
property located in Muskegon.
4. Net profits from the rental of real or tangible personal property located during the tax year for an employer. Vacation time, sick time and
in Muskegon. holidays are not included in total days worked in arriving at the wage
5. Premature distributions from an Individual Retirement Account (IRA) allocation percentage. Vacation pay,holiday pay, sick pay, bonuses,
where a deduction was claimed on a current or previous year’s city severance pay, etc. aretaxable to same extent as normal earnings.
income tax return. 100% Earned in Muskegon. All wages, salaries, tips, sick pay,
6. Premature distributions from a pension plan attributable to work bonuses, deferred compensation, severance pay, and other
performed in Muskegon. compensation (Form W-2, box 1) is taxable to nonresidents who worked
7. Deferred compensation earned in Muskegon before retirement. 100% of the time in the city.
Line 1 – Wages, Salaries, Tips, Etc. Allocate Total Wages. Nonresidents who performed only part of their
All wages taxed on the federal return are to be reported on page 1, line 1, services for an employer in the city must allocate their wages using the
column A of the city return. All W-2 forms showing income earned in W-2 form box 1 amount, not box 18. Compute excludible wages using
Muskegon and or tax withheld for Muskegon must be attached to the the Nonresident and Part-Year Resident Wage Allocation section of the
return. Excludible Wages, Salaries, Tips, Etc. schedule.
Wage Allocations on Commissions, Etc. A nonresident salesperson
Page 1 & 2 and Schedule 1 of the federal tax return must be paid on a commission basis or other results achieved should allocate
attached to all resident tax returns. wages based on commissions received or other results achieved
attributable to efforts expended in Muskegon. A nonresident insurance
Report on page 1, line 1, column B, the total excluded wages. All salesperson paid sales commissions and renewal commissions should
excluded wages must be documented on the Excludible Wages, allocate compensation on the following basis: Allocate commissions
Salaries, Tips, Etc. schedule
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