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Income Tax

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1. How does Portland spend funds generated through the Income Tax?

The City of Portland is one of 24 Michigan cities that has an Income Tax. In Portland, these funds are used for paving, curb and gutter, sidewalks, street lights, and related water and sewer infrastructure.

2. What is the tax rate for the City of Portland Income Tax?

The individual tax rate is 1% for residents and 0.5% for non-residents. The corporation tax rate is 1%.

3. Why do I have to make quarterly estimated income tax payments?

You must make estimated income tax payments throughout the year if you expect to owe more than $100 for individuals and partnerships or $250 for corporations. Quarterly payments are due on or before April 30, June 30, September 30, and January 31. With the first three payments made during the tax year for which they are paid, and the last payment made in the following year.

For fiscal year taxpayers, payments are due the last day of the fourth, sixth, and ninth month during the year for which the payments are made and the end of the thirteenth month following the beginning of the fiscal year.

4. How do I file for an extension of time?

Requests for an extension of time to file a return must be made in writing to the Portland Income Tax Office. An extension is not a request for additional time to pay tax due.

The Administrator may extend the filing date of the return for up to six months or for the same period granted by a federal extension. Submit a copy of the Federal extension form with payment adequate to cover the unpaid portion of your annual liability to the Portland City Income Tax Office on or before the due date of the return. If no tax is owed or you will be claiming a refund, do not file an extension. Extensions filed without a tentative tax payment will not be accepted or processed by the Income Tax Office.

5. What are the penalty and interest charges if I pay my income tax late?

If you file and pay late, penalty is due at the rate of one percent per month to a maximum of 25% of the tax due. Interest is also due at the annual rate of one percent about the current prime rate. The interest rate is adjusted on January 1 and July 1 of each year. If the computer penalty and interest amount is less than $2.00, the minimum late charge is $2.00.

6. Can I e-file my Portland income tax return?

Current year resident or nonresident income tax returns may be e-filed through a paid tax preparer. Self-prepared tax returns are not accepted electronically. You must file a paper copy with the City of Portland.

7. Who needs to file a City of Portland Individual Income Tax Return (P-1040)

Every resident or part year resident of Portland who has taxable income in a tax year must file a return. Every nonresident who has taxable income derived from working or from sources inside the city limits must file a return. Married persons may file either a joint return or separate returns. The following examples may be used to assist you in determining if a return is required.

For all tax years:

• If you are a single person or married filing separately and your income is greater than $1,000, you must file a return. 
• If you are married, filing jointly with your spouse and your income is greater than $2,000, you must file a return.
• If you are a single person and are age 65 or older and your income is greater than $2,000, you must file a return.
• If you are married filing jointly with your spouse and both you and your spouse are age 65 or older and your income is greater than $4,000, you must file a return
• If you do not meet the requirements for filing a return, but Portland tax was withheld or estimated tax payments were made, you must file a return to receive a refund.

8. I lived in the City of Portland for part of the year. How do I file?

If you lived in Portland for part of the year and did not work in Portland as a nonresident, you need to file a Portland Individual Income Tax Return (P-1040). Report on this form only your taxable income while a resident, regardless of the sources of the income. Check the part year resident box to the right of the address block on the form and fill in your dates of residency.

9. I lived in the City of Portland for part of the year, and I worked in the City all of the year. How do I file?

If you lived in Portland for part of the year and worked in Portland all of the year, you need to file a Portland Individual Income Tax return (P-1040 with a Schedule TC). Schedule TC is only used with a resident return and it allows the taxpayer to be taxed at two different rates. During the period of residency all income is taxable from any source at the resident rate. As a nonresident only that income from sources within the city is taxed at the nonresident rate.

10. What is taxable income?

A resident is subject to tax on all items included in total federal income. Taxable income includes: 

• Salaries, bonuses, wages, commissions, fees, vacation pay, profit sharing plan income and other compensation regardless of where earned. 
• Deferred compensation distributions.
• Fair market value of merchandise or services received as compensation. 
• Net profit from operation of a business or profession or other activity regardless of where earned. Income from a partnership, estate or trust, interest from bank accounts, credit unions, savings and loan associations and other income regardless of where earned. 
• Rental income, capital gains and dividends. 
• Lottery winnings 

A nonresident is subject to tax on all items included in total federal income, which are derived from or connected with Portland sources. Taxable income includes: 

• Salaries, bonuses, wages, commissions, fees, vacation pay, profit sharing plans and other compensation for services rendered as an employee in Portland. 
• Fair market value of merchandise or services received as compensation. 
• Net profits from the operation of a business or profession or other activity conducted in Portland. 
• Net profits from rental of real and tangible property located in Portland. 
• Net profits from sale or exchange of personal property located in Portland.

11. What is nontaxable income?

The following types of income are nontaxable to both residents and nonresidents.

Nontaxable income includes:

Gifts, inheritances, bequests and distributions of principal from estates and trusts.

Proceeds from insurance, pensions, annuities and retirement benefits (including Social Security) even if taxable under the Internal Revenue Code.

Unemployment compensation, supplemental unemployment benefits, welfare relief payments and workers compensation.

Interest from U. S. obligations such as Savings Bonds and Treasury Notes, obligations of the states, or subordinate units of government of the states.

Compensation for service in the U. S. armed forces, including reserve components.

The following items are nontaxable to nonresidents:

Interest, dividends and royalty income.

Income from trusts and estates.

Qualified deferred compensation properly reported on a Form 1099-R.

12. What deductions are allowable when filing the City of Portland Individual Income Tax Return (P-1040)

The following expenses incurred as an employee are allowable subtractions. A portion of expenses is allowable to nonresidents to the extent they apply to income taxed by Portland. 

• Travel, Meals and lodging while away from home
• Expenses as an outside salesperson that works away from his/her employer's place of business (does not include driver/salesperson whose primary duty is service and delivery)
• Transportation (but not transportation to and from work)
• Expenses reimbursed under an expense account or other arrangement with your employer, if the reimbursement was included in gross income.

Other allowable deductions include: 

• Alimony paid, to the extent deductible under the Internal Revenue Code. Nonresidents must prorate the deduction based upon the ratio of Portland income to total income. 
  • Child support is not deductible. 
• Individual Retirement Account deduction to the extent allowed under the Internal Revenue Code. Nonresidents must prorate the deduction based upon the ratio of each taxpayer's earned income in Portland to each taxpayer's earned income everywhere. 
• Moving expenses into the area only.

13. Who must file a City of Portland Corporate Income Tax Return (P-1040)

Every corporation doing business in the city, whether or not it has an office or place of business in the city and whether or not it has net profits, is required to file a return. Corporations cannot choose to file and be taxed as partnerships. However, nonprofit corporations who have applied for and received approval for exemptions from federal income tax, state and national banks, trust companies, insurance companies, building and loan institutions, savings and loan associations and credit unions are exempt from the city income tax.

Subchapter "S" corporations doing business in the City of Portland must file as a "C" corporation for city income tax purposes.

14. Who must file a City of Portland Partnership Income Tax Return (P-1065)?

Every partnership that conducted business in the City of Portland, whether or not an office or place of business was maintained in the city is required to file an annual return. Syndicates, joint ventures, pools and like organizations must also file an annual return.

15. Can a partnership pay the City Income Tax for the partners?

Yes. If a partnership chooses to pay the taxes for the partners, the partners are not required to file a return as long as they have no other income subject to tax. The partners must file an individual return if they have taxable income other than the distributive share of net profits from the partnership.

16. Who must withhold Portland City Income Tax?

Every employer who does business in the City of Portland is required to withhold Portland income tax. This applies even if you do not maintain a location in Portland.

Non-profit organizations that are exempt from income tax, such as charitable, religious and governmental organizations, mush withhold tax from compensation paid to their employees.

If you are located outside Portland and have employees who work in Portland, you must withhold Portland income tax for all employees working in Portland.

17. How do I file and pay my withholding?

Payments are due monthly if your total monthly withholding exceeds $100; otherwise, your payments are due quarterly. To reconcile income tax withheld each year; you must file the City of Portland Income Tax reconciliation return (PW-3). Payments can also be made on our new Online Employer Withholding Tool.

Payment must be mailed with proper identification to:

Portland City Income Tax
259 Kent Street
Portland, MI 48875

18. When are my withholding payments due?

All withholding tax payments are due on the last day of the month after the reporting period. All Portland income tax withholding payments should be sent to the above address.

19. I do not have withholding for this quarter. What do I do?

You must return the proper form showing a zero for the quarter for which you owe no tax to avoid receiving a delinquent notice for failing to report tax due.

20. Who has to file a City of Portland Fiduciary Income Tax return (P-1041)?

Every trust and estate, that has gross income from the operation of a business, the rental or sale of real and tangible personal property or income from a partnership located in or allocable to the City of Portland. Trusts and estates are not required to pay City of Portland estimated income tax payments.

21. Helpful Hints

Write your social security number or federal identification number on your check and the type of tax that you are paying. Never send a check or money order without some form of documentation. This could cause a delay in applying your payment to the proper account. Always include your social security and telephone number on any correspondence, so we may research your issue properly and contact you if we have questions. When mailing returns, always keep a copy for your records. Please notify us in writing when you or your business has a change (i.e. address, your business incorporates, you sold your business, you discontinued your business, etc.).