17. Are estimated tax payments required for flow-through entities filing composite returns?

Flow-through entities (FTE)s who intend to file a Michigan Composite Individual Income Tax Return (Form 807) may be required to remit estimated income tax payments with a Michigan Estimated Income Tax Voucher for Fiduciary and Composite Filers (Form MI-1041ES).  For each quarter, the FTE should file one Form MI-1041ES with the quarterly estimated payment for all participants whose share of annual income tax liability is expected to exceed $500 after exemptions and credits. Form MI-1041ES must be completed with the name of the FTE and the FTE’s federal employer ID number (FEIN) that will claim the estimated payments on their composite return. Check the box for “Composite” to indicate the Filer Type. Do not submit estimated payments with Form MI-1041ES for members who are not participating in the composite return.

FTEs using a calendar tax year must file vouchers and remit quarterly estimated payments with Form MI-1041ES by April 15, June 15, September 15, and January 15.

FTEs with a fiscal tax year must remit quarterly estimated tax payments with Form MI-1041ES using the due date that corresponds with its fiscal tax year end.  The first estimated payment is due on the 15th day of the fourth month after the prior fiscal tax year ends.  Quarterly estimated payment due dates for a fiscal tax year filer apply regardless of the participants’ filing tax year.

The Michigan Income Tax Act requires every person to remit quarterly estimated tax payments if that person's income tax liability, after credits and withholding, is expected to exceed $500 for their tax year. MCL 206.301(1)

Failure to remit required estimated tax payments may result in the Michigan Department of Treasury charging penalty and interest.

The Michigan Income Tax Act (MCL 206.301(11)), provides that the amount of an installment of estimated tax shall be computed in the same manner as provided in the Internal Revenue Code.  If an individual owes more than $500, they may not have to make estimated tax payments if they expect their withholding to be at least:

  1. 90 percent of the tax shown on the return for the current taxable year, or

  2. 100 percent of the tax shown on the return for the preceding taxable year, or

  3. 110 percent of the tax shown on the return for the preceding taxable year, if the preceding year’s adjusted gross income is more than $150,000 ($75,000 for married filing separately).

Penalty is 25 percent of the tax due (with a minimum of $25) for failing to remit estimated tax payments or 10 percent (with a minimum of $10) for underpaying estimated tax or remitting estimated tax payments late.  Interest is one percent above the prime rate and is computed monthly.  The rate is adjusted on July 1st and January 1st.