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New Michigan Form 4917—Flow-Through Withholding Quarterly Return
Michigan partnerships, S-corporations and LLC’s will be receiving a mailing from State of Michigan regarding their responsibility to withhold and pay flow-through withholding quarterly.
Here is the simple explanation of what is required and how it affects a business:
A partnership, S-corp or LLC with partners, shareholders or members is required to withhold and pay quarterly on their K-1 recipients IF
The K-1 recipient is a C-corporation, and the business income of the business is over $200,000, THEN withhold and pay 6% Michigan tax on their distributive share of income. Michigan calculates the business income same as Federal taxable income plus add-back of bonus depreciation and DPAD taken on Federal return.
The K-1 recipient is a Michigan non-resident individual, THEN withhold and pay 4.35% Michigan tax on their distributive share of income regardless of the entity’s level of business income.
The withholding requirement only applies to Michigan-based sales, so you must prorate if they have sales in other states.
Additionally, if the flow-through entity has K-1 recipients who are also flow-through entities, you must also examine these situations for the 6% corp/4.35% individual withholding requirement.
In addition to the quarterly return to accompany payments, Form 4918 Annual Withholding Reconciliation Return is required by February 28th.
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