Michigan ~ Corporate, Personal Income Taxes: Withholding on Flow-Through Entities Discussed

The Michigan Department of Treasury has issued guidance discussing withholding tax requirements on flow-through entities. A flow-through entity is an S corporation, partnership, limited partnership, limited liability partnership, or a limited liability company not taxed as a corporation.

Every flow-through entity in Michigan must withhold on every member that is a nonresident individual or trust. This withholding is calculated at the personal income tax rate on the distributive share of taxable income reasonably expected to accrue, after allocation or apportionment, to the nonresident. Furthermore, a flow-through entity with business activity in Michigan that reasonably expects to accrue more than $200,000 in apportioned or allocated business income for the tax year must withhold on the distributive share of each member that is a corporation at the corporate income tax rate. Finally, a flow-through entity with business activity in Michigan that reasonably expects to accrue more than $200,000 in apportioned or allocated business income for the tax year must also withhold on the distributive share of each member that is a flow-through entity. This withholding is usually calculated at the corporate income tax rate with the exception that if the upper-tier flow-through entity can identity the ultimate taxpayer in a lower tier as a nonresident individual, then the personal income tax rate may be used. Also, no withholding is required if the ultimate taxpayer is a resident individual.

Quarterly returns (Form 4917, Flow-Through Withholding Quarterly Return) for a calendar year taxpayer are due April 15, July 15, October 15, and January 15. The annual reconciliation return (Form 4918, Flow-Through Withholding Annual Reconciliation Form) is due February 28. Fiscal year taxpayers should use corresponding due dates.

Withholding on Flow-Through Entities, Michigan Department of Treasury, April 2012

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

All stories by: Wolters Kluwer Tax and Accounting