Revenue Administrative Bulletin 1987-6

Approved: August 14, 1987

SINGLE BUSINESS TAX ESTIMATES

Estimated payment requirements for S Corporations, Professional Corporations and Partnerships to File on a Calendar Year Basis Beginning with Tax Year Ending December 31, 1987.

RAB-87-6. The Internal Revenue Code of 1986 requires that most professional and "S" corporations file returns on a calendar-year basis for 1987. S corporations, professional corporations and partnerships having fiscal years ending in 1987 are required to file a short-period return for the tax period ending December 31, 1987.

Estimated Payments - Safe Harbor

No penalty and interest will apply for underpaid estimates (MCL 208.71(4)):

1. If the sum of the estimated payments equals at least 85% of the tax liability or 1% of the gross receipts for the tax year, and the amount of each estimated payment reasonably approximates the tax liability incurred during the quarter for which the estimated payment was made, or

2. If the preceding year's (12-month year) tax liability was $20,000.00 or less and if the taxpayer submitted 4 equal installments of the sum which equals the previous year's tax liability.

Example:

If the tax liability for a 12-month fiscal year ending April 30, 1987 was $12,000, the estimate requirement to meet the prior year safe harbor for a short tax year (covering May 1 through December 31, 1987) would be $8,000.00. This is calculated by dividing the full year's tax liability by 12 and multiplying the quotient by the number of months in the short year, e.g., ($12,000 divided by 12) x 8 = $8,000. The $8,000 must be paid in equal amounts based on the number of payments and dates on the chart at the end of this bulletin.

Estimated Due Dates

Single Business Tax estimates and returns shall be filed for the short tax year ending December 31, 1987, based on the prior fiscal year-end, except for the final estimate which will be due January 31, 1988.

Example:

An S Corporation with a tax year ending January 31, 1987, and an 11-month tax year ending December 31, 1987, shall file estimates based on the following schedule:

Utilize the chart below to determine due dates of quarterly estimates for short-period returns ending January 31, 1987.