MI-1041

Adjustment Reason

The flow-through entity from which you claimed a credit may not have filed their annual FTE tax return (Form 5772) or their return may not have been processed.

Steps to Remedy

Contact the flow-through entity to ensure they filed their return (including supporting Form 5774) and inquire whether it has been processed. The FTE taxpayer can call 517-636-6925 to inquire about the status of their return. Until the FTE tax annual return for the tax year ending with or within your tax year has been processed without adjustments, your claimed credit cannot be granted.

Adjustment Reason

The credit was not fully funded by deadline, which is the 15th day of 3rd month after the flow-through entity’s tax year. Only a credit funded by that date can be claimed against the same tax year; any remaining credit must be claimed in a later tax year once it is funded.

Steps to Remedy

Contact the flow-through entity and ensure your records match their records, including the timing of their payments.

Adjustment Reason

The amount of credit you claimed does not match the credit allocated to you by one or more flow-through entities on their annual return (specifically, Form 5774, Michigan Flow-Through Entity Tax Schedule for Reporting Member Information).

Steps to Remedy

Ensure you reported the identifying information and amount of credit for each flow-through entity from which you received a credit. Read guidance on tiered / indirect credits.

Contact the flow-through entity and ensure your records match their records as filed on their original or, if applicable, amended return. If your records match, the flow-through entity should contact the Business Taxes Division at Treas-FTE-Customer-Support@michigan.gov or 517-636-6925.

Treasury’s Business Taxes Division may have adjusted the FTE return or reported payments to match Treasury’s records. If the flow-through entity is not appealing those adjustments, ensure your credit is reported consistently with any Treasury corrections.

Adjustment Reason

You have not been identified by an electing flow-through entity as a recipient of one or more of the FTE tax credits you claimed. Your name or account number may not have been accurately reported on the FTE annual return (specifically, Form 5774, Michigan Flow-Through Entity Tax Schedule for Reporting Member Information).

Steps to Remedy

Contact the flow-through entity to ensure your records match theirs and if the flow-through entity needs to correct an error, the flow-through entity should file an amended return.

Adjustment Reason

You may have indirect/tiered credits and did not report them correctly. Read general FTE Tax frequently asked questions. If you do not directly own the entity that generated a credit you claimed, provide the name and account number of that credit-generating entity and the member flow-through entity (upper tier) through which the credit flowed.

Steps to Remedy

Respond to your notice as directed with the applicable documentation. Read Reporting to Members Templates for guidance and contact your flow-through entities as needed.

Adjustment Reason

The FTE tax credit claimed by a fiduciary must be prorated by the ratio of the electing flow-through entity's income retained by the fiduciary to the electing entity's total income included in the fiduciary's distributable net income. Your return indicates that the fiduciary distributed all or some of the income to your beneficiaries; therefore, the full credit cannot be claimed by the fiduciary.

Steps to Remedy

Refer to FTE and Fiduciary Frequently Asked Questions.

Amend Form MI-1041 to claim the appropriately prorated credit.

If not already done, the fiduciary must report to each beneficiary their prorated share of the FTE tax credit, along with all other required information, to complete their individual return(s).