Following are some issues that have come to our attention from tax practitioners. It looks like taxpayers, tax preparers as well as the Department of Treasury are fighting through the learning curve on the Michigan Business Tax. Misery enjoy company. Read on.
Denial of Extension Requests
We continue to see notices on fiscal year MBT extensions that say: "Your request for more time to file your MBT return has been denied. Extension requests must be received by the original due date of the annual return." The instructions say that the form and payment must be postmarked on or before the original due date of the return.
We follow up with a copy of the certified mail receipt as proof of timely filing which then results in an approval that states "Your request for more time to file your MBT return has been approved."
This is clearly some kind of computer glitch or other error with the state. This is very frustrating for practitioners as our clients ask why we missed the filing deadline. Even though taxpayers receive the approval letter, approvals do not indicate that the previous correspondence is in error.
Underpayment Interest and Penalty Notices
There appears to be two different types of notices coming out of Treasury related to MBT return adjustment issues. One type of notice is fairly typical in the language and what to do if the taxpayer disagrees.
On another type of notice that makes changes to taxpayer returns, the notice states that if the taxpayers disagree, a written appeal must go the Office of Hearings Division, the Michigan Tax Tribunal or the Michigan Court of Claims.
Treasury says: "There are two notices being generated currently. If a taxpayer receives the notice that states the options are Office of Hearings Division, the Michigan Tax Tribunal or the Court of Claims, that is the only option available. Treasury will not accept correspondence related to a request for waiver of any penalty.
These Office of Hearings Division, the Michigan Tax Tribunal or the Court of Claims notices are being generated when the change relates only to underpayment interest and penalty. Essentially, preparers were told "don't waste our time" requesting any penalty waiver for underpayment penalties for 2008.
Treasury is not able to provide a calculation for how the interest and penalty is assessed, but here is how it is calculated/determined. First, they start with 75% of the tax (as changed by law - only for 2008.) If the tax is underpaid, they then assess interest only for the first 3 quarters and penalty and interest for the 4th quarter as by that point there was no more confusion over how the estimates should be calculated. The interest is not available for waiver, and the 4th quarter penalty is assessed as determined by Treasury. Treasury indicated that this is the ONLY potential adjustment available as it relates to penalties assessed for 2008 underpayment penalties.
Michigan Business Tax Change Notices
The MBT technical section has said that we can respond to Treasury without choosing one of the three choices as outlined on the notice. There is rarely any information given as to how or why changes are being made to returns.
It is difficult to know exactly what to document or defend with no information other than a line number on a tax return and an "as corrected by Treasury" column,. It seems ridiculous to be required to go the Tax Tribunal to resolve an issue that has not even been considered at Treasury.
We have been told by Treasury that over 6000 MBT notices were mailed in December alone and that the time period for processing taxpayer responses is unknown at this time. Taxpayers are ready to file in some case the 2009 returns with unresolved questions as to overpayments and other issues from prior year returns.