Michigan Form 807 Composite Income Tax Return: Filing and Payments

Michigan Form 807 is the composite individual income tax return that a flow-through entity can file on behalf of two or more of its eligible nonresident members. Instead of each nonresident owner filing a separate Michigan return, the entity bundles their Michigan-sourced income onto one form, calculates the tax at Michigan’s 4.25 percent individual rate, and sends the payment to the Michigan Department of Treasury. Filing is voluntary, and the return covers individual income tax only. It does not satisfy any entity-level filing obligation.¹

Which Entities Can File

A flow-through entity (FTE) with Michigan taxable income or loss may choose to file Form 807. No law requires it, and the entity and every participating member must agree before the return is submitted.²

For this form, a flow-through entity means an S corporation, general partnership, limited partnership, limited liability partnership, or limited liability company that is not taxed as a C corporation federally. Publicly traded partnerships and disregarded entities do not qualify. An intermediate FTE in a tiered ownership chain may also participate on behalf of its own nonresident members if each ultimate owner can be identified, and the return must include a Tiered Structure Schedule showing every entity’s name, FEIN, and ownership percentage at each level.¹

Which Members Can Participate

Not every owner is eligible. A nonresident ultimate owner can be included on Form 807 only if all of the following are true:²

The owner was not domiciled in Michigan at any point during the tax year and was not a part-year resident.
The owner has Michigan-sourced income that would otherwise require a Michigan return.
The owner agrees to claim only one Michigan personal exemption on the composite return.
The owner is not subject to the federal excess business loss limitation.
The owner is not a C corporation and did not elect to file federally as a C corporation.

Nonresident trusts can participate, but beneficiaries of a nonresident trust are not treated as members of the trust for composite purposes and cannot be included.¹

Any nonresident member who prefers not to participate can opt out and file a Michigan Individual Income Tax Return (Form MI-1040) with a Nonresident and Part-Year Resident Schedule (Schedule NR). Members who opt out handle their own estimated tax payments.¹

Completing the Return

Before starting, pull together the entity’s completed federal return (Form 1065 for partnerships or Form 1120S for S corporations), the Michigan Schedule of Apportionment (Form MI-1040H), and identifying information for every participating and nonparticipating member.²

Entity Information and Income

Enter the entity’s name, FEIN, and tax year at the top of the form. Report the entity’s ordinary income or loss directly from the federal return: line 23 of Form 1065 or line 22 of Form 1120S. Apply the Michigan apportionment percentage from Form MI-1040H to determine how much of that income is sourced to Michigan.²

Tax, Exemption, and FTE Credit

Michigan’s individual income tax rate is 4.25 percent for both the 2025 and 2026 tax years.³ Multiply total taxable income on the return by 0.0425 to arrive at the composite tax. The total should reconcile to the sum of each participant’s individual tax liability in Column 3 of Schedule A.²

Each participant receives a prorated personal exemption. For the 2025 tax year, the $5,800 exemption is multiplied by the ratio of the participant’s Michigan income to total income, and the result is the maximum that participant can claim on this form.²

If the entity elected to pay the Michigan flow-through entity tax, participants may claim a credit for their allocated share. Report each participant’s share in Column 4 of Schedule A. Only credits from the filing entity itself are allowed; credits generated by a different electing flow-through entity cannot be claimed on this return.⁴

FTE Tax Adjustments

Two adjustments keep the composite return aligned with the entity-level FTE tax. Add back each participant’s share of any Michigan FTE tax that the entity paid and deducted from income during the year, because that deduction already reduced the distributive share flowing to participants. Subtract each participant’s share of any FTE tax refund the entity received and included in income during the year.⁴

Required Attachments

Include the following with the completed Form 807 when applicable:²

The first five pages of U.S. Form 1065 or U.S. Form 1120S.
Form MI-1040H, the Michigan Schedule of Apportionment.
Schedule A, listing every participating member with distributive share of Michigan income, tax liability, and FTE tax credit.
Schedule B, listing nonparticipating members.
Schedule C, listing Michigan-resident members of the entity.
A Tiered Structure Schedule if an intermediate FTE participates.
A certification statement, signed by an authorized officer or general partner, confirming that each participant has been informed of the terms and conditions of participation.
Supporting documentation for any flow-through entity tax credit claimed.
A copy of Form 4 if an extension of time to file was requested.

Where and When to File

Mail the completed Form 807 and all attachments to the Michigan Department of Treasury, P.O. Box 30058, Lansing, MI 48909.⁵

The return for any tax period ending in 2025 is due April 15, 2026.²

If the entity cannot meet that date, file Form 4 (Application for Extension of Time to File Michigan Tax Returns) on or before the original due date, and remit any remaining estimated tax liability with it. A Michigan extension is required even when the entity already has a federal extension. The federal extension does not automatically extend the Michigan deadline.²

Estimated Tax Payments

If participants’ combined annual income tax liability is expected to exceed $500 after exemptions and credits, the entity must remit quarterly estimated payments using Form MI-1041ES. File one voucher per quarter covering all participants. Do not submit estimated payments for members who are not participating in the composite return.¹

For calendar-year filers, quarterly due dates are April 15, June 15, September 15, and January 15 of the following year. Fiscal-year filers follow a schedule tied to their fiscal year-end, with the first payment due on the 15th day of the fourth month after the prior fiscal year ends. Use the flow-through entity’s name and FEIN on the voucher, and check the “Composite” box to indicate the filer type.¹

Underpayments carry real cost. The penalty for failing to remit estimated payments is 25 percent of the tax due, with a minimum of $25. If the entity pays something but not enough, the penalty drops to 10 percent with a $10 minimum. Interest accrues monthly at one percent above the prime rate, adjusted every January 1 and July 1.¹

Penalties for Late Filing and Late Payment

When a return is filed late or tax goes unpaid, the penalty is 5 percent of the tax for the first two months, plus another 5 percent for each additional month or partial month the return remains unfiled or the tax remains unpaid, up to 25 percent.⁶ Interest runs from the date the tax was originally due until the date it is paid, at one percent above the prime rate, adjusted twice a year.¹

How Form 807 Interacts With Other Filings

Form 807 does not replace the Michigan Flow-Through Entity Tax Annual Return (Form 5772). An entity that elected to pay the Michigan FTE tax must still file Form 5772 separately. The composite return handles individual-level income tax for participants; the FTE return handles the entity-level tax. One does not satisfy the other.⁴

Participating in a composite return spares a participant from filing a separate Michigan individual return only when the participant has no other Michigan-sourced income. If a participant does have other Michigan income requiring a Form MI-1040, the participant cannot subtract income already reported on the composite return. Instead, the participant claims a credit on the MI-1040 for their share of tax paid through the composite filing, reported as tax withholding. Treasury may ask for documentation to support the credit.¹

What the Entity Must Report to Participants

After filing, the entity must furnish each participant with:²

The entity’s FEIN and tax year.
The participant’s distributive share of income allocated or apportioned to Michigan, from Schedule A, Column 2.
The participant’s share of tax liability on the composite return, from Schedule A, Column 3.
The participant’s allocated share of the flow-through entity tax credit, from Schedule A, Column 4, with a note that this credit should not be claimed on any other income tax return.
The entity’s Michigan sales and total sales everywhere.
The participant’s prorated exemption allowance.

Net Operating Losses

An NOL deduction can be claimed on Form 807, but only to the extent it is attributable to the same participants who were on the return during the loss year, and in the same ownership proportions they held at that time. If the membership roster or ownership percentages have shifted, only the overlapping portion of the loss carries forward.¹

1
State of Michigan. Composite
2
Michigan Department of Treasury. 2025 Michigan Composite Individual Income Tax Return
3
Michigan Department of Treasury. State Individual Income Tax Rate for 2026 Tax Year Determined
4
State of Michigan. FTE and Composite IIT
5
Michigan Department of Treasury. 2024 Michigan Composite Individual Income Tax Return
6
Michigan Legislature. Michigan Compiled Laws 205.24