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As many taxpayers are aware, the state of Michigan enacted the Flow-Through Entity (FTE) Tax effective for the tax years beginning January 1, 2021, allowing entities classified as an S corporation or a partnership, for federal tax purposes, to elect to pay Michigan income tax at the entity level. Without an FTE election, the Michigan income from a partnership or an S corporation is taxed at the shareholder or member level on a Michigan individual, estate tax, or trust return. The Michigan FTE election was for a three-year tax period. As a result, the election is no longer valid for those taxpayers who made the election beginning with the 2021 tax year.
Taxpayers wishing to continue their Flow-Through Entity tax treatment in 2024 will need to make a NEW election by March 15, 2024. Any first-time FTE elections are also due by March 15, 2024. To make an election, payment must be made by March 15, 2024, via the taxpayer’s Michigan Treasury Online (MTO) account in the form of a payment of any amount towards the 2024 tax year. The 2023 FTE annual tax return is due March 31, 2024, for those calendar year taxpayers.
Confusion has arisen due to the March 15 payment deadline for the 2024 Renewal Election and the March 31 deadline for the 2023 Annual Tax Return. Michigan is among a minority of states that require an election into the FTE program BEFORE the due date or extended due date of the prior year’s annual FTE tax return.
Fiscal year taxpayer elections are due within the first two and half months of the fiscal year.
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