If highly-skilled individuals are what your business requires, then Michigan is a state you’d enjoy expanding your business to. From having the highest concentration of engineers, to possessing the professionals from the top-ranked professions, in Michigan, you are spoilt for choice when it comes to skilled talent. A lower cost of living in this state also ensures that it retains this talent. Furthermore, Michigan state also allows for easy international business access its favorably located within 500 miles of nearly half the U.S. and Canadian population making it the ideal global business hub.
If you have recently expanded your business into this state, or if you’re considering doing so, understanding the cost of apportionment is important to help you accurately report earnings to the IRS and local governments.
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C Corporations
- Filing Requirements
- The Michigan Corporate Income Tax (CIT) imposes a 6% corporate income tax on C corporations and taxpayers taxed as corporations federally. The CIT has one credit, the small business alternative credit, which offers an alternate tax rate of 1.8% of adjusted business income. There are no other credits, except those under the MBT election (addressed below). Insurance companies and financial institutions pay alternative taxes. The CIT replaces the Michigan Business Tax (MBT) for most taxpayers, effective January 1, 2012. Taxpayers with less than $350,000 in allocated or apportioned gross receipts and/or less than or equal to $100 in annual liability are not required to file or pay the CIT. The gross receipts threshold does not apply to financial institutions or insurance companies.
- Allocation & apportionment
- One Factor Formula: Sales factor
- Market-based apportionment
- Michigan follows the market-based rule in sourcing receipts from the performance of services to the state. Sales from the performance of services are sourced to Michigan if the recipient of the service receives all of the benefits of the service in Michigan. If the benefit of the service is received in more than one state, the sale is sourced to Michigan based on the proportion of the benefit of service received in Michigan. The rule applies to both the corporate income tax and the Michigan Business Tax (for taxpayers with certificated credits that elect to file and pay under the Michigan Business Tax).
- Filing Requirements
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Employees & individual filers
- The following individuals are required to file a 2021 Michigan individual income tax:
- File a return if you owe tax, are due a refund, or your AGI exceeds your exemption allowance. You should also file a Michigan return if you file a federal return, even if you do not owe Michigan tax. This will eliminate unnecessary correspondence from Treasury.
- If your parents (or someone else) can claim you as a dependent on their return and your AGI is $1,500 or less if single or married filing separately or $3,000 or less if filing a joint return, you do not need to file a return unless you are claiming a refund of withholding.
- Important: If your income subject to tax (MI-1040, line 14) is less than your personal exemption allowance (line 15) and Michigan income tax was withheld from your earnings, you must file a return to claim a refund of the tax withheld.
- The following individuals are required to file a 2021 Michigan individual income tax:
Download our Multi-State Tax Filing Requirements Guide
Ensuring Accurate Tax Filing
Keeping a handle on these different laws and tax implications might be difficult for your staff members but can be accomplished by outsourcing a CPA. Allow an expert who deals with business structuring, accounting, and taxation regularly set up accounting software to factor in applicable tax laws for each US state.
Fusion CPA recently expanded into new states bringing us firsthand experience and knowledge. We have a team of certified public accountants who are highly skilled in handling multistate taxes. Our team of professionals understands the federal and state laws in various states and jurisdictions.
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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.
