Michigan State Estimated Tax Payments: What You Should Know

July, 19 2024 by Steve Banner, EA, MBA

I was about to begin by making the blanket statement that there is probably nobody in America who enjoys paying tax, but then I remembered that the MegaMillions Lottery is being drawn on Saturday night. If it so happens that I hit the jackpot and win a boatload of cash, I’m pretty sure that I will not be upset about paying some of those millions back to the Feds and State in taxes.

But for most of us, we pay our regular taxes without even thinking about it, because our state and Federal taxes are taken out of our paycheck before we receive it. This happens regardless of whether we get paid every week, every two weeks, or every month. When the end of the year comes around, we file our tax returns to report our taxable income and figure out our correct tax liability for the year. When we compare this number to the amount that has been withheld by our employers, we find out whether we will receive a refund or whether we have a balance due.

However, it doesn’t work this way for everybody. Tax is not withheld from some types of income before you receive it. This includes things like dividend income, rental income, interest income, capital gains, and even income from cryptocurrency. And the same thing applies to some types of taxpayers such as small business owners, independent contractors, freelancers, and other self-employed taxpayers, because taxes are normally not withheld from the payments these folks receive for their work. There needs to be some organized method for these taxes to be collected, and this is where the “estimated tax” system comes into play. In effect, it’s as if my local self-employed plumber, Joe, receives a paycheck every 3 months and, at the end of each 3-month pay period, he estimates the amount of taxes he owes for that quarter and sends a check to the state. Just like the rest of us, when Joe fills in his tax return at the end of the year, he will find out whether he owes more tax or if he’s due for a refund.

Regardless of whether they are a Michigan resident, taxpayers who expect to owe more than $500 when they file their MI-1040 return for 2024 must make estimated tax payments. Several exceptions apply, and you may not have to make estimated tax payments if you expect your 2024 withholding to be at least:

• 90% of your total 2024 tax, or
• 100% of your 2023 tax, or
• 110% of your total 2023 tax if your 2023 adjusted gross income is more than $150,000 (or $75,000 for married filing separately).

You also need to be aware that penalties and interest may be charged to taxpayers who do not meet any of the above exceptions and fail to make their required estimated payments. The same applies if payments are underpaid or paid late in any quarter, even if the taxpayer is due to receive a refund when they file their income tax return.

Estimated tax installment payments are normally due on the following dates, unless the 15th falls on a weekend or holiday. In that case, the payment will be due on the next business day:

• April 15th;
• June 15th;
• September 15th; and
• January 15th of the following year.

Instead of making their estimated tax payments for the year in four equal installments, taxpayers also have the option of making a single payment of their entire year’s estimated tax in one payment on or before the date that their first of four installments would normally be due (April 15th).

Payments may be made electronically through the Michigan Department of Treasury ePayment system, or via mail by using Form MI-1040ES. For more information, refer to 2023 MI-1040ES, Michigan Estimated Income Tax for Individuals.