Montana Department of Revenue

MW-4 Wage Withholding Exemptions to be Renewed Each Year

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MW-4 Wage Withholding Exemptions to be Renewed Each Year

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Last December, the Department released Form MW-4, which includes a section for employees who qualify for one of four exemptions from wage withholding:

  • Enrolled tribal members living on the reservation of their tribe, if their wages are earned on that reservation.
  • North Dakota residents earning wages in Montana.
  • Reservists and National Guard members, generally when they receive a Title 10 order.
  • Spouses of military service members who are in Montana to be with their spouse, and who earn wages.

These exemptions must be renewed every year by employees.

For more information about these exemptions see Publication 1, and the instructions of Form MW-4.

Publication 1: Prepaying Income Tax Cover Sheet

Calculating Gross Household Income for the Elderly Homeowner/Renter Credit

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The 2018 Form 2 includes a new schedule for calculating the Elderly Homeowner Renter Credit.

When determining gross household income, the claimant reports information from the Montana Forms 2 and the federal 1040 Forms of all the members of the household.

We have received some comments about line 3 of this calculation pertaining to the add-back of pensions and Social Security benefits being left out of the Federal Adjusted Gross Income (FAGI). It appears that the instructions for this line do not cover all the possibilities for federal Form 1040, line 4a.

The following are alternative instructions for line 3 that can be used to solve that problem:

On line 3, enter the sum of the following two amounts:

  • Amount 1: Reduce Form 2, line 4a, by any after-tax contributions or any rolled-over tax-free distribution that you included on that line. If what remains is more than the amount on line 4b, subtract line 4b. Otherwise, Amount 1 is zero.
  • Amount 2: Subtract Form 2, line 5b, from Form 2, line 5a.

Important additional notes:

  1. Any part of a pension received by a household member not reported on line 3 can be reported on line 7 of the Elderly Homeowner/Renter Schedule.
  2. Qualified charitable deductions (QCD) from IRAs constitute non-taxable income and must be included in gross household income. QCDs must be reported on line 4a of the tax return. Our formula does not always capture the entire amount of QCD, so any remaining amount not added back to line 3 would have to be included on line 7.

Taxpayers who already filed do not have to file an amended return; the department will make the necessary corrections. We thank the tax preparers’ community for bringing this issue to our attention.

Form NOL for 2018 is Now Available

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The Montana Net Operating Loss (Form NOL) for 2018 is now available. It includes guidance on a new class of net operating losses (NOL) and how to include the loss limitation in section 461(l) of the Internal Revenue Code (IRC) in your NOL deduction so you can take it in future years.

Because of changes made to section 172 of the IRC in the Tax Cut and Jobs Act, Montana NOL deduction from losses incurred in 2018 must now follow new principles. This is because Montana statute has a rolling conformity with this federal section. For simplification, the Montana NOL instructions call the net operating losses following the new principles Class B NOLs.

Class A NOL
Class A NOLs are NOL deductions from losses incurred in tax years before 2018.
These keep following the principles that applied in tax years before 2018.
Class B NOL
Class B NOL, including a 2018 NOL, cannot be carried back, except for farming losses, which can only be carried back two years.
Class B NOL deductions cannot be more than 80 percent of your taxable income reported before such NOL deduction.
As a result, when a Class B NOL deduction is taken, there will always be Montana taxable income. However, there is no longer any limit to the number of years you can carry forward such losses after taking an NOL deduction.

Form NOL also includes guidance on the new limitation in Subsection 461(l) of the IRC. If you have more than $250,000 of business losses, or $500,000 in the case of a joint return, the excess cannot be taken in 2018 and must be included in the Class B NOL deduction to carry forward to 2019.

You can find instructions about how to calculate excess losses for Montana tax purposes in the Montana Individual Income Tax (Form 2) Instructions.

March 1 Deadline Reminder for Property Owners

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We would like to remind owners of real and personal property about several important deadlines approaching soon.

Business and Industrial Equipment and Machinery Reporting

Business and industrial equipment owners need to report their personal property online with the department’s TransAction Portal (TAP).

Businesses must report if the total statewide market value of their equipment is over $100,000.

Businesses with a statewide market value $100,000 or less are exempt from taxation and do not have a reporting requirement.

Livestock Reporting

Livestock owners have to report the number of livestock owned as of February 1.

Livestock is subject to the per capita fees set yearly by the Board of Livestock.

Reported your livestock online at ReportYourLivestock.mt.gov

Property Tax Exemption Applications

Nonprofit, religious, or charitable organizations may qualify for a property tax exemption.

Applications must be submitted by March 1 to be considered for 2019.

Related forms and links:

Land Value Property Tax Assistance Program

Home owners may qualify for the Land Value Property Tax Assistance program if the department’s appraised market value of their land is more than 150% of the department’s appraised market value of their home and other improvements on the land.

Apply using the Land Value Property Tax Assistance for Residential Property Form.

Montana Publication 1: Prepaying Income Tax is Now Available

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Montana Publication 1: Prepaying Income Tax is now available in My Revenue.

This publication explains the Montana pay-as-you-go system, which includes taxes and estimated taxes.

The publication provides information on withholding:

  • Wages,
  • Mineral royalties, and
  • Pass-through income.

Information on Form MW-4

Employees
Montana Publication 1 contains additional information about the new Montana Employee’s Withholding Allowance and Exemption Certificate (Form MW-4).
Employers
Please refer to the Montana Withholding Tax Guide.

Quarterly Estimated Payments

Publication 1 also explains when individuals, trusts, and estates must make quarterly estimated tax payments.

The Montana Individual Estimated Income Tax Worksheet (Worksheet ESW) and the Estimated Tax Annualization Worksheet (Worksheet ESA)–which can be used to calculate quarterly payments–are included with the publication.

Publication 1 includes updates to the worksheets:

Worksheet ESW
Worksheet ESW was redesigned to show each quarterly installment as the sum of the payments that you should have paid by the due date of the installment. That way, if you miss or underpay an installment, or if your situation changes, the worksheet calculates catch-up payments automatically.
Worksheet ESA
Worksheet ESA was simplified and can now be used without fist completing Worksheet ESW.

Both worksheets require you to first apply your overpayment from tax year 2018 when determining if any quarterly estimated payments are due for tax year 2019.

Read Montana Publication 1: Prepaying Income Tax in My Revenue.

Publication 1: Prepaying Income Tax Cover Sheet

The Montana Department of Revenue will be closed on for Lincoln's and Washington's Birthdays.

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