Single member limited liability companies and qualified subsidiaries may have a new filing requirement in Michigan. The Michigan Department of Treasury recently issued a notice to taxpayers stating that entities and persons disregarded for federal tax purposes are required to file a Michigan business tax return if they meeting the filing threshold.
Entities typically disregarded for federal tax purposes include single-member limited liability companies and qualified Subchapter S subsidiaries. A person disregarded for federal tax purposes includes a sole proprietor, or a branch or division of its owner. If the test for unitary is met, these entities and persons may file as a member of a unitary business group.
If a taxpayer is engaged in business activity in Michigan and has apportioned or allocated gross receipts of $350,000 or more to Michigan, the taxpayer must file a Michigan business tax return.
The requirement for these entities to file a Michigan business tax return applies to all open tax periods under the Michigan business tax code. The Michigan business tax reporting requirement became effective January 1, 2008. The first return was due April 30th, 2009. Michigan has a four-year statute of limitations. This means all Michigan business tax returns are currently in an open tax period. If you are required to file a return under this new rule, you must do so by June 30, 2011. Interest is added to the tax due from the time the tax was originally due. Penalties for late filing are being waived if corrected returns are filed before this date. Penalties will be assessed on returns filed after June 30, 2011.
If you do not have a Federal Employer Identification Number (FEIN) or Michigan Treasury Assigned Number (TR), you must obtain them before filing a Michigan business tax return. You may apply for a FEIN online at www.irs.gov. You may apply for a TR online at www.michigan.gov/businesstaxes.
It is important to note that if a taxpayer previously filed a Michigan business tax return that included one or more of these previously disregarded entities, it must amend their returns for all open periods, even if the amended return does not result in a different tax liability.
Your accounting professional can assist you in preparing your Michigan business tax return.