Who is Required to Pay Flow-Through Withholding?
An FTE is required to withhold. In a tiered structure, the source FTE is required to withhold and in some cases the intermediate FTE member may also be required to withhold. Trusts are not FTEs for purposes of withholding and are not required to withhold on trust beneficiaries.
About The Tax
On January 1, 2012, changes to Michigan’s Income Tax Act created the Corporate Income Tax (CIT) as well as new withholding requirements for flow-through entities that have members, partners, or shareholders that are corporations or other flow-through entities.
The requirement under the Income Tax Act to withhold on nonresident individuals that are members, partners, and shareholders of a flow-through entity has also changed. Business income is now apportioned using only the sales factor. In addition, a fiscal year flow-through entity will now file its quarterly and annual returns based on its own fiscal quarters and fiscal year and not on the calendar quarters and year as was the case previously. See “ Reporting and Payment Requirements ” for additional changes.