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How can I avoid receiving a bill for underpayment of estimates?

The Michigan Income Tax Act requires taxpayers to make quarterly estimated payments if the income tax liability will be $500 or more after credits and withholding. Payments made with a request for an extension to file are not considered estimated tax payments.

Taxpayers who failed to make required estimated payments, paid late, or underpaid in any quarter, may be charged penalty and interest. Penalty is 25% of the tax due (with a minimum of $25 per quarter) for failing to make estimated payments or 10% (with a minimum of $10 per quarter) for failing to make sufficient estimated payments or paying them late. Taxpayers may be subject to penalty and interest even if they are due a refund when they file their income tax return.

Note: Taxpayers have the option to pay the total annual estimated tax by the first quarter due date of April 15 rather than making 4 quarterly payments.

The Michigan Department of Treasury follows the Internal Revenue Service (IRS) guidelines for estimated tax requirements. Based on the IRS estimated income tax requirements your total tax paid through credits and withholding must be:

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

If you did not make the required estimated tax payments, file the Michigan Underpayment of Estimated Income Tax (Form MI-2210) to determine the amount of penalty and interest due. If you do not file an MI-2210, you may receive a Notice of Proposed Penalty and Interest for Underpaid Estimates.