Why am I being charged penalty and interest?

The Michigan Department of Treasury follows the IRS guidelines for estimated tax requirements. Based on the  IRS estimated income tax requirements, to avoid penalties for failure to make estimated tax payments, your total tax paid through credits and withholding must be:

90% of your current year's tax liability,
or 100% of the previous year's liability,
or 110% if your previous year's adjusted gross income is more than $150,000 ($75,000 for married filing separately).

Penalty is 25% for failing to file estimated payments or 10% of underpaid tax per quarter.  Interest is 1% above the prime rate.