How do I avoid the penalty on Michigan MI-2210 due to no requirement for estimate tax payments?

[TomB-17]

The General Instructions on the MI-2210 form state "No penalty is charged if estimates were not required in the immediately preceding year; however, interest may still be due."  I was not required to pay Michigan estimated taxes in 2023 or 2024 and yet am still being assessed a penalty on my 2024 return because my tax due is over $500.  I cannot find a way to mark this in TurboTax so that I can avoid the penalty.  Any suggestions?  Thanks.

[LenaH]

I created a mock return of your situation. I inputted less than $500 of tax liability in 2023 and over $500 in tax liability for 2024. 

With that information inputted, my Line 27 shows zero due for total penalty and interest on Form MI-2210.

There are estimates tax vouchers being created because The Michigan Income Tax Act requires that a person must make quarterly estimated payments if the per.... Since it was over the limit for 2024, the vouchers were created. However, you are not being assessed penalty or interest. 

[TomB-17]

THANK YOU SO MUCH LenaH for your reply.  Line 27 on my MI-2210 shows a $51 penalty ($48 penalty+$3 interest).  Here are some other factors that may be the reason your mock return does not reflect this same result.  I am military so my income is not taxed in Michigan.  Therefore, I had $0 of Michigan taxes withheld from my 2023 and 2024 W2s.  So when TT tries to calculate if I meet the 100% and 90% withholding thresholds, it gets a zero result.  My only income taxable in MI is from interest, dividends and capital gains.  Interest and dividends are negligible but I had roughly 10K of capital gains in 2023 and 19K in 2024.  So my MI tax bill was $192 in 2023 (not enough to require estimated payments) and $599 in 2024 (enough to trigger the MI-2210 form).  If you look at MI-2210 in the forms view, I am guessing your mock return shows box B checked in the "Form MI-2210 Information Smart Worksheet" section at the top.  This would solve my problem.  I could not find a way in the Step-by-Step instructions to make sure this box is checked.  There are questions for box A and box C, but not box B.  Am I allowed to check this box myself in the forms view and then submit my return?  Thanks again.

[TomB-17]

Sorry - update.  I now see under the "Enter Your 2023 Michigan Tax" Step-by-Step question where I can set my 2023 Michigan Tax = $0 if I did not have a tax liability in 2023.  But that is not the correct answer to the question and it does not check box B on the form.  I would think the correct TT question should be "Enter zero if you were not required to pay MI estimated taxes in 2023".  Am I interpreting this correctly?

[TomB-17]

Final update – after further review and call to MI tax help desk, I decided to submit the return with the “let the Michigan Treasury calculate the penalty” checked.  I have concluded that TT has implemented the MI-2210 correctly but the MI-2210 form is incorrect.  There is no provision in MI-2210 to avoid the penalty when “estimated tax payments are not required”.  Michigan requires 2 consecutive years of >$500 tax due before a penalty is assessed.  There should be a provision in the penalty section (lines 23-26) which says “if 2023 tax (line 4) was less than $500, enter 0 for penalty”.  I hope that the Michigan Treasury agrees and calculates that my penalty is zero.