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Taxpayer-Initiated Disclosure

Overview

A person that does not qualify under the Voluntary Disclosure legislation may be eligible for a penalty waiver as outlined in RAB 2005-03, Penalty Provisions. This program allows a person to voluntarily disclose a tax deficiency without imposition of penalties by the Department. Limitations to the lookback period are not allowed under this program.

Qualification Requirements

Except as applied to estimated tax returns, taxpayer-initiated disclosure means any voluntary disclosure of a tax deficiency when there has been no prior contact by the department.

No penalty will be applied to tax deficiencies on amended returns, providing:

  1. There has been no contact by the department. A letter of inquiry is not considered a previous contact. However, a person will not qualify for the penalty waiver under the taxpayer-initiated disclosure after receiving a final letter of inquiry.
  2. The taxpayer is not under investigation by the department for the tax period involved, and
  3. The taxpayer or agent pays the tax deficiency and interest without further action by the department.

No penalty will be applied to tax deficiencies paid with the filing of a delinquent return providing:

  1. There has been no contact by the department,
  2. The taxpayer is not under investigation by the department,
  3. The tax period of the return(s) includes the taxpayer's first filing period for that tax, and
  4. The taxpayer or agent pays the tax deficiency and interest without further action by the department.

A Taxpayer is required to file a written request or statement to be considered for the taxpayer-initiated disclosure exception from penalty.

How to Make a Taxpayer-Initiated Disclosure

Complete and submit all of the following:

  1. A letter that includes contact information (i.e. name, mailing address, phone number, and email address) and attests to the appropriate conditions identified above.
  2. The appropriate tax returns or worksheets.
    1. If the disclosure is for Michigan Business Tax, Corporate Income Tax, Individual Income Tax, or Composite Individual Income Tax, tax returns must be completed and submitted for all years. Michigan Individual Income Tax and Composite Individual Income Tax returns will require copies of federal returns. Payment of tax and interest is required. To compute interest, use our online Penalty and Interest Calculator, disregard the penalty.
    2. If the disclosure is for sales, use or withholding tax. applicants should use MI SUW Disclosure Workbook to file. Email the workbook, the request letter, and Form 518 (if not registered) to Treas-Dis-VoluntaryDisclosure@michigan.gov. Payment of tax and interest is required.

Payment of tax and interest is required. To compute interest, use our online Penalty and Interest Calculator, disregard the penalty.

Remit the full amount of tax and interest due along with a check payable to the State of Michigan and/or separate payments made via MTO. Mail the letter, returns/worksheets and payment to the

Discovery and Tax Enforcement Division
P.O. Box 30140
Lansing, MI 48909

The Discovery and Tax Enforcement Division will send a notice acknowledging receipt of returns/worksheets and payments.

More Information

The Corporate Income Tax (CIT) is effective as of January 1, 2012. The CIT replaces the Michigan Business Tax (MBT); however, MBT taxpayers who have received or been assigned certain certificated credits may elect to continue to file under the MBT rather than the CIT in order to claim such credits.

Flow-through entities (excluding trusts) reasonably expected to accrue more than $200,000 of business income may be required to withhold Michigan income tax at the corporate income tax rate on the distributive share of the business income of any member that is a corporation or another flow-through entity.

Learn More About Withholding Requirements

Learn More About the Corporate Income Tax

If you would like additional information regarding the voluntary disclosure program or the taxpayer-initiated disclosure program, contact the Discovery and Tax Enforcement Division at:

Discovery and Tax Enforcement Division
P.O. Box 30140
Lansing, MI 48909
Or call 517-636-4120.