Michigan S Corporation Taxes
Michigan S Corporations pay a variety of state and federal taxes. The main taxes include income and sales tax. Corporations may also be required to pay other types of taxes depending on how they are structured.
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Michigan businesses must file a wide range of returns, including sales and use, withholding, and business income taxes. There are also a number of state and local taxes that may apply. Michigan businesses can pay their business taxes online or by mail and may be able to take advantage of tax incentives and rebates.
The primary Michigan business tax is the corporate income tax (CIT), which applies to profit corporations and is based on an entity’s taxable income, apportioned by its gross receipts in the state. It is also possible for a business to elect the small business alternative credit to offset this tax.
Since January 1, 2021, Michigan offers an optional Flow-Through Entity (FTE) tax. S-corporations can elect to pay this tax on a portion of their Michigan-sourced income at the individual income tax rate instead of passing the entire income to shareholders. This can be beneficial for some S-corporations, particularly those with members in high tax brackets.
In addition to the CIT, the state of Michigan also charges franchise and excise taxes. These taxes are imposed on businesses that engage in particular activities, such as manufacturing and selling certain types of goods. They can be in the form of a flat rate fee or a percentage of total revenue.
Another type of Michigan business tax is the withholding tax levied on employees’ wages. The employer collects this tax and withheld from each employee’s paycheck. In Michigan, the withholding tax rate is 4.25%. The IRS provides a withholding table to help employers calculate the correct amount to withhold from each employee’s paycheck. If a business fails to withhold the correct amount, it will be subject to a penalty. File forms 5773 or 5774 and pay the FTE tax by March 15th (if elected). Report the FTE credit to shareholders.
How to Pay Michigan S Corporation Taxes?
Flow-Through Entity (FTE) Tax
Online: This is the preferred method and can be done through the Michigan Treasury Department’s Individual Income Tax Payment System (MI-Taxes). You can use a checking or savings account, debit card, or credit card.
Telephone: You can make payments by phone using a debit card or credit card by calling the Treasury Department at 517-231-4986.
Mail: Send a check or money order payable to the “State of Michigan – Flow-Through Entity Tax” to the address provided on the payment voucher or form 5773/5774.
Michigan Business Tax (MBT)
Online: Similar to FTE, MBT payments can be made electronically through MI-Taxes using a checking or savings account, debit card, or credit card.
EFT Debit: S-corporations can enroll in the Electronic Funds Transfer (EFT) Debit program to automatically deduct payments from their checking or savings account on due dates.
Telephone: MBT payments can also be made over the phone using a debit card or credit card by dialing 517-373-2971.
Mail: As with FTE, send a check or money order payable to the “State of Michigan – Michigan Business Tax” to the address specified on the payment voucher or form MBT-104.
How to Start an S-Corp in Michigan?
A Michigan S corporation is a distinct legal entity that is separate from its shareholders. This means that the shareholders’ financial risk is limited in the event of the company’s failure. In addition, the S corporation’s assets are protected from creditors. Unlike a partnership or sole proprietorship, this protection also applies to the shareholders’ personal assets.
S corporations are required to pay state and federal taxes, including income and sales tax. In addition, they must obtain a federal tax identification number (EIN) and a business license. A registered agent must serve as the Michigan corporation’s official agent and have a physical address in the state.
If you are ready to start a Michigan S corporation, Inc Authority can help you file IRS Form 2553 and obtain the special S-Corp status. Their team will ensure that your business meets all the eligibility requirements and will complete the federal S-Corp election process. They will also help you obtain a private bank account for your Michigan S-corporation and provide a detailed tax consultation. They offer several paid plans that include additional features, including a dedicated customer success advisor and an expedited filing service.
