At the end of 2021, the State of Michigan amended the Income Tax Act to create a flow-through entity tax. As a result, S corporations and most partnerships can now elect to pay income tax at the entity level. Further benefits of the new election include:

  • Income taxes paid by an entity are deductible from the entity’s federal taxable income.
  • Paying tax at the entity level reduces the amount of income reported on federal income tax returns.
  • The amount of tax paid to the Internal Revenue Service (IRS) will decrease if deductions are itemized and are subject to the $10,000 limitation on state and local taxes. The election won’t change the amount of tax that owners pay to Michigan.

Action Required

If your business decided to reap the benefits of this election and is a calendar-year taxpayer, the second quarter estimate is coming due on June 15. Be sure to make this payment via the Michigan Treasury Online to avoid any penalties. For more information on payment, read the Instructions for Electing Into and Paying Flow-Through Entity Tax.

Doeren Mayhew’s tax professionals recommend paying your estimate at least one business day before the June 15 deadline to ensure it is processed on time. If you have questions about calculating and paying the upcoming estimate, contact us today.