Notice: SUW Installment Payment Options Available

INSTALLMENT PAYMENT OPTION AVAILABLE FOR MONTHLY AND QUARTERLY SALES, USE, AND WITHHOLDING TAX RETURNS DUE ON JUNE 22, 2020

Issued: May 26, 2020

This notice establishes a general waiver of penalty and interest for any late payment of sales, use, and withholding tax otherwise due on June 22, 2020 for non-accelerated monthly and quarterly tax filers that will remit tax on an installment basis over a period not to exceed 6 months as prescribed in this notice.

Department authorization to waive penalty and interest.  This notice is based on the Department’s general statutory authorization to waive penalty and interest on tax remitted after the statutory due date.  The Revenue Act[1] does not prevent a compromise of interest or penalties, or both,[2] and permits the Department to waive penalties where reasonable cause can be established.[3] Due to the ongoing business disruption caused by COVID-19 in Michigan, the Department has determined that, under these particular limited circumstances, reasonable cause exists to waive penalties and, as permitted, interest.  The Department, therefore, is treating payments of tax otherwise due on June 22, 2020 as automatically eligible for a waiver of penalty and interest for taxpayers that remit installment payments in accordance with this notice.

Prior waivers of penalty and interest until June 22, 2020.  Through a series of notices issued on March 19, 2020,  April 14, 2020, and May 15, 2020, the Department previously waived penalty and interest for the late payment of tax or the late filing of any sales, use, and withholding tax return originally due on March 20, 2020,  April 20, 2020, and May 20, 2020.  These waivers effectively extended the filing and payment deadlines for certain sales, use, and withholding taxpayers required to file returns and remit tax on a monthly or quarterly basis.  For monthly tax filers, these waivers established June 22, 2020 as the return and payment deadline for each of the monthly tax periods of February, March, April, and May. For quarterly filers, the waivers similarly extended until June 22, 2020 the due date of the tax return for the 2020 first quarter (1/20 – 3/20). Accelerated filers were not eligible for the waivers set forth in those notices. 

Installment payment option for sales, use, and withholding payments due June 22, 2020. In conjunction with the return filing and payment deadlines modified by the prior notices, the Department will temporarily waive penalty and interest for late payment of sales, use, and withholding tax due on June 22, 2020 where such tax is remitted in equal installments over a period not to exceed 6 months. The waiver under this installment payment option is limited to penalty and interest for failure to pay tax and, thus, the returns subject to the installment payment option must still be filed as of June 22, 2020.  The initial installment payment for all taxpayers will be due on that same date, but the amount and frequency of the remaining payments will be determined according to the taxpayer’s established return filing frequency. Quarterly and monthly filers should refer to the schedule set forth within this notice to determine when installment will be due.

Special instruction for remitting installment payments. To ensure accurate reporting of the payments, each installment payment must be submitted separately from any tax payment otherwise due in that tax period. This means, for example, that a monthly filer must generally submit two payments in each month within the installment period, with one payment representing the tax otherwise due on the monthly return and one payment representing the installment payment as authorized and required by this Notice to receive a penalty and interest waiver.  An installment payment must be submitted either electronically through Michigan Treasury Online (MTO)[4] or by check accompanied with a completed Sales, Use, and Withholding (SUW) Payment Voucher (Form 5094). Under either payment method, each installment payment must be identified by (or as corresponding with) its return period designation. Monthly filers must designate each installment payment as applicable to the February return period whereas quarterly filers must designate each installment payment as applicable the first quarter return period. Any overpayment of tax for any period within the installment period will automatically be applied to the following period’s tax liability; therefore, taxpayers do not need to divide installment payments between multiple periods.

Installment payment schedule for monthly tax filers – The returns for the February, March, April, and May tax periods must be filed by June 22, 2020 to establish the combined Installment Amount and be eligible for the penalty and interest waiver as provided for in this Notice.  Beginning with the initial installment payment due on June 22, 2020, each installment payment must be equal to one-sixth (1/6) of the Installment Amount. Thereafter, those payments must be made separately on vouchers or through MTO on the due date of each respective monthly return. The initial payment and each subsequent installment payment must designate February as the tax return period.  See the following filing and payment schedule for more detailed information on payments that must be made throughout the tax year: 

Tax Period

Return Due Date

Total Amount Paid:

Tax Remitted with Return

Total Amount Paid:

Installment Payment

February

March

April

May

June 22, 2020

Combined liability eligible as Installment Amount (IA)

1/6 of IA*

June

July 20, 2020

100% of June tax

1/6 of IA*

July

August 20, 2020

100% of July tax

1/6 of IA*

August

September 21, 2020

100% of August tax

1/6 of IA*

September

October 20, 2020

100% of September tax

1/6 of IA*

October

November 20, 2020

100% of October tax

1/6 of IA*

November

December 21, 2020

100% of November Tax

N/A

* Designated as February tax period and paid separately from tax paid with return due in that month
 

Example: Assume a $600 Installment Amount was determined from tax liabilities of $75 for February, $100 for March, $200 for April, and $225 for May.  On June 22, 2020, the taxpayer would file each respective return and remit a $100 installment payment on a voucher that identifies the payment for the February tax period. From that payment, $75 would be applied to the outstanding February liability, with the remainder ($25) applied to the outstanding March liability.  The following month, on July 20, 2020, the taxpayer would file a return and remit tax relating to the June tax period in conjunction with its regular monthly filing obligation. Separately, the taxpayer would remit another $100 installment payment through MTO or on a voucher identifying the payment for the February tax period.

Installment payment schedule for quarterly tax filers ­– The return for the first quarter tax period is due on June 22, 2020 to establish the Installment Amount to be eligible for the penalty and interest waiver as provided for in this Notice. Beginning with the initial installment payment due on that date, each subsequent installment payment must be equal to one-third (1/3) of the Installment Amount, with payments due on September 21, 2020 and November 20, 2020.  These installment payments will not change the quarterly payments and returns otherwise due for the second quarter on July 20, 2020 and for the third quarter on October 20, 2020.  Each installment payment should be designated as applicable to the first quarter for 2020 (1/20 – 3/20).  See the following filing and payment schedule for more detailed information on tax payments that must be made throughout the year:

Tax Period

Payment Due Date

Total Amount Paid: Tax Remitted with Return

Total Amount Paid: Installment Payment

Q1

June 22, 2020

Entire liability eligible as Installment Amount (IA)

1/3 of IA*

Q2

July 20, 2020

100% of Q2 tax

N/A

Q2

September 21, 2020

N/A

1/3 of IA*

Q3

October 20, 2020

100% of Q3 tax

N/A

Q3

November 20, 2020

N/A

1/3 of IA*

*Designated as first quarter payment (1/20 – 3/20)

 

Example: Assume a $600 Installment Amount was determined from the 2020 first quarter (Q1) tax return filed on June 22, 2020.  With that return, the taxpayer would remit a $200 installment payment through MTO or on a voucher, identifying the payment as relating to the 2020 Q1 return period (1/20 – 3/20). The taxpayer would subsequently remit the second quarter return and payment on July 20, 2020 in conjunction with its regular quarterly filing obligation. On September 21, 2020, the taxpayer would remit the next $200 installment payment on a voucher that identifies the payment for the Q1 tax period (1/20 – 3/20).

Installment payment option is automatically applicable upon return filing.  Taxpayers do not need to contact or otherwise submit any documentation, except as required by this Notice, to inform the Department of the use of the installment payment option. Rather, the installment payment option is automatically applied to all returns due to be filed by eligible taxpayers on June 22, 2020.  Thus, to use the installment option, taxpayers simply need to file the returns due on that date to establish the Installment Amount and then remit with those returns the appropriate amount of the initial installment payment. The initial payment should be designated for the February return period for monthly filers and for the Q1 period for quarterly filers. 

Taxpayers eligible to use installment payment option.  The waiver of penalty and interest for failure to pay tax under the installment option is limited to sales, use, and withholding returns and payments due on June 22, 2020. Any payment or return otherwise due after that date will not be eligible for the installment payment option and is subject to penalty and interest for any late payment of the tax.  The waiver is further not available for accelerated sales, use or withholding tax filers, as those taxpayers should continue to file returns and remit tax as otherwise required by law. 

Early payment discounts for taxpayers who remit tax by June 22, 2020.  Notwithstanding the automatic application of the installment payment option as authorized herein, all filers are encouraged to file returns and remit tax in full as of the modified due date of June 22, 2020. If fully paid on or before June 22, 2020, discounts for early payment of the tax[5] remain generally available for any taxpayer that files a return and remits tax in full as of June 22, 2020. Taxpayers who use the installment payment option to remit tax on an installment basis may not claim any discount in computing the tax liability for that respective tax period. 

Failure to remit installments. Installment payments will be applied to tax periods within the installment period, beginning with the oldest tax period first.  If, at the conclusion of the installment period, the taxpayer fails to pay any amount otherwise owed, then penalty and interest for late payment of the tax will begin to accrue on the remaining amount owed and will be subject to assessment which will include the tax deficiency. 

Additional information will be posted to the Department’s website at www.michigan.gov/taxes. Taxpayers with questions regarding this notice may contact the Department at 517-335-7505. 


[1] MCL 205.1 et seq.

[2] MCL 205.28(e)

[3] MCL 205.24(4).

[4] https://mto.treasury.michigan.gov/

[5] MCL 205.54.