At the end of 2021, Michigan amended the Income Tax Act to create a flow-through entity (FTE) tax. As a result, S corporations and eligible partnerships can now elect to pay income tax at the entity level. If entities choose to make this election, they’ll experience the following benefits:
- They can deduct income taxes paid by the entity from the entity’s federal taxable income.
- They reduce the amount of income they’ll report on federal income tax returns.
- They’ll decrease the amount of tax they pay to the IRS if they itemize deductions and are subject to the $10,000 limitation on state and local taxes. Making the FTE election won’t change the amount of tax that owners pay to Michigan.
If your business is a calendar-year taxpayer and has taken advantage of this election, second-quarter estimates are due June 15, 2022. Be sure to make this payment via the Michigan Treasury Online to avoid any penalties.
Our tax professionals recommend paying your estimate at least one business day before the June 15 deadline to ensure timely processing. For more information, read the Instructions for Electing Into and Paying Flow-Through Entity Tax.
Questions about calculating and paying the estimate?