Michigan Composite Individual Income Tax Return: Form 807

Michigan Form 807 is the composite individual income tax return that a flow-through entity files on behalf of its nonresident members, replacing the separate Michigan individual returns those members would otherwise owe. The entity reports each participant’s share of Michigan-source income, applies the state’s 4.25% individual income tax rate, and remits one payment to the Department of Treasury.¹ For partnerships, S-corporations, and LLCs with owners in multiple states, this is a meaningful administrative shortcut. It also interacts with Michigan’s separate flow-through entity tax in ways that regularly trip up preparers, so the two should not be confused.

Who Can Be Included on the Return

The filing entity can be any structure where income passes through to owners: a partnership, an S-corporation, or an LLC taxed as either one for federal purposes.² The return must include at least two participating nonresident members.

Each participant has to meet all of these conditions:

Nonresident for the full year. Neither full-year nor part-year Michigan residents qualify; Michigan residents must file their own individual returns.
Subject to Michigan individual income tax. The member must be an individual, a nonresident estate, a nonresident trust, or an intermediate flow-through entity with nonresident ultimate owners.
Willing to claim only one Michigan personal exemption and to give up additional exemptions or credits they might otherwise be entitled to on a standalone return.
Not subject to the federal excess business loss limitation.
Not a C-corporation.²

One misconception is worth clearing up. A nonresident who has Michigan income from more than one flow-through entity is still eligible to participate in any of those entities’ composite returns.¹ If the member separately files an individual Michigan return to report the other income, they claim a credit for the tax the composite return already paid on their behalf. The credit mechanism exists precisely so that members with multiple Michigan income sources can still use composite filing where it’s offered.

What the Entity Takes On by Signing

When an authorized officer or general partner signs Form 807, they are declaring that the entity holds power of attorney from each participant to file on that participant’s behalf. That is not a formality. Treasury mails refund checks, assessments, and all correspondence to the filing entity rather than to individual members. The entity also accepts responsibility for any additional tax, interest, or penalties Treasury later determines are owed.² Where the Michigan-source income is substantial, that exposure is worth raising with members before anyone signs anything.

Completing and Filing Form 807

At the top of the form, the preparer enters the entity’s name and Federal Employer Identification Number. The core calculation applies the 4.25% individual income tax rate to the total distributive share of Michigan-source income allocated to participating members.³ Each participant gets one personal exemption. The form has dedicated lines for estimated payments already made, withholding, and the flow-through entity tax credit if the filing entity also paid Michigan’s FTE tax.

Required Attachments

Form 807 must be submitted with the following:

A copy of the entity’s federal return (first five pages of Form 1065 or Form 1120-S).
Michigan Schedule of Apportionment (Form MI-1040H), if applicable.
Schedule A, listing every participating nonresident member.
Schedule B, listing members who are not participating.
Schedule C, identifying any Michigan resident members of the entity.
A signed statement from an authorized officer or general partner certifying that each participant has been informed of the terms of the program.
A Tiered Structure Schedule if the entity has intermediate flow-through entities in its ownership chain.
A copy of Form 4 if an extension was filed.²

Where to Send It and How to Pay

Payments can be submitted electronically through Michigan Treasury Online (MTO) or by mailing a check or money order payable to the “State of Michigan.” Write the entity’s FEIN and tax year on any paper payment. Paper returns and payments go to:

Michigan Department of Treasury
P.O. Box 30058
Lansing, MI 48909

Quarterly Estimated Payments

If the combined composite tax liability for all participants is expected to exceed $500 after exemptions and credits, the entity must make quarterly estimated payments using Form MI-1041ES with the “Composite” box checked.⁴

For calendar-year entities, those payments are due April 15, June 15, September 15, and January 15 of the following year. Fiscal-year filers follow a schedule tied to their year-end, with the first payment due on the 15th day of the fourth month after the prior fiscal year closes. Only participants in the composite return belong in the estimated payment calculation. Members who will file their own Michigan returns should be left out of it.

Skipping estimated payments entirely draws a penalty of 25% of the tax due, with a $25 minimum. Underpaying draws a 10% penalty with a $10 minimum. Interest runs on top of either.⁴ These charges are separate from the late-filing penalty, so an entity that both skips its quarters and files late can rack up compounding exposure.

Filing Deadline and Extensions

The composite return for any tax period ending in 2025 is due April 15, 2026.² MCL 206.315 sets that April 15 deadline for all calendar-year composite returns.¹

If the entity cannot file on time, it may request an extension by filing Form 4 on or before April 15. A Michigan extension is required even if the entity has already filed a federal extension. An extension of time to file is not an extension of time to pay, so any remaining estimated tax liability not already covered by quarterly payments must be sent with Form 4.²

Penalties and Interest for Late Filing

Missing the April 15 deadline without an extension triggers a penalty of 5% of the unpaid tax for the first two months, with an additional 5% for each month or partial month the return remains unfiled, capped at 25%.⁵ Interest also accrues monthly at a rate of one percentage point above the adjusted prime rate, running from the original due date until the balance is paid in full.⁶ Between the late-filing penalty, any estimated-tax penalty, and interest on top, the arithmetic gets uncomfortable quickly.

Form 807 and Michigan’s Flow-Through Entity Tax Are Not the Same

This is the point where most of the confusion sits. Michigan has two different mechanisms for handling flow-through entity income, and they serve different purposes.

Form 807 is an individual-level income tax filing. The entity files it as a convenience for its nonresident members, but the tax is computed as if each member filed separately, and it satisfies those members’ individual Michigan filing obligations.⁷

Michigan’s flow-through entity tax (FTE tax), reported on Form 5772, is an entity-level tax. The entity itself elects to pay income tax on qualifying income at the 4.25% rate, and its members receive a refundable credit against their own income tax liability.⁸ The FTE tax functions as a workaround for the federal cap on state and local tax deductions.

The two returns do not substitute for each other. Filing the FTE tax return does not satisfy members’ individual filing obligations, and the composite return does not satisfy the entity’s FTE tax obligation. An entity can file both, and often should. When it does, each participant’s share of the FTE tax paid by the filing entity flows through as a credit on Form 807’s Schedule A.²

There are limits to mixing the two across entities. A flow-through entity that elected and paid Michigan FTE tax on another, non-electing entity’s income cannot participate in that other entity’s composite return. Credits from a different electing entity’s FTE tax also cannot be claimed on a composite filing.⁷ The FTE credit on a composite return is limited to tax generated by the same entity that filed the composite.

Credit for Members Who Also File Individually

A nonresident member included on a composite return who also files their own Michigan return claims a credit for the tax already paid on their behalf through the composite.¹ A nonresident who participates in two different Michigan partnerships, for instance, could be included in one entity’s composite and file individually to report income from the other, crediting the composite payment against total liability.

The filing entity is required to report each participant’s share of the composite tax payment and any FTE tax credit so the member has the documentation to claim the credit on an individual return.² A credit already claimed through a composite return cannot also be claimed on a separate individual return.

1
Michigan Legislature. Michigan Compiled Laws 206.315 – Composite Income Tax Return
2
Michigan Department of Treasury. 2025 Michigan Composite Individual Income Tax Return
3
Michigan Department of Treasury. Withholding Tax Information by Calendar Year
4
Michigan Department of Treasury. Composite
5
Michigan Legislature. Michigan Compiled Laws 205.24 – Failure or Refusal to File Return or Pay Tax
6
Michigan Legislature. Michigan Compiled Laws 205.23 – Deficiency in Tax Payment
7
Michigan Department of Treasury. FTE and Composite IIT
8
Michigan Department of Treasury. Flow-Through Entity Tax Frequently Asked Questions