As part of five bipartisan bills recently signed by Governor Whitmer, Michigan Flow-Through Entity Tax Procedures have been improved. The act allows for expanded opportunity to elect into the tax and allows for all tax payments made for a given year to be reported as a credit to the taxpayer so long as the payments are made by the due date of the return, including extensions.
The original law required that taxpayers had to make a payment by the 15th day of the third month of the tax year in which they want to opt into the tax. This requirement remains in effect for tax years beginning before January 1, 2024. For tax years beginning after January 1, 2024, a taxpayer has until the last day of the ninth month after the end of the tax year.
The original law provided no safe harbors for estimated tax payments. The new law establishes that estimates are required when tax is expected to exceed $800. In addition, safe harbors have been established for estimates. If the prior year’s tax was $20,000 or less, the taxpayer can use the prior year tax as a safe harbor and submit payments of the tax amount in four equal installments. Interest and penalty under this safe harbor shall not be assessed as long as the estimates paid total 90% or more of the current year’s tax liability or 100% of the previous year’s tax liability. Interest and penalty shall not be assessed for any quarterly estimated payment that was due prior to the taxpayer making the election to pay the tax due for that tax year, unless there is a determination that there was an intentional disregard of the law.