Tax Rates and Liability

The tax rate is a combination of Account Building Component (ABC), Non-chargeable Benefits Component (NBC) and Chargeable Benefits Component (CBC).

What may increase the tax rate:

• If you have benefits charges
• If your payroll increases in the computation period
• If you have a negative reserve (paid more for benefits than we've collected in tax)
• If you have missing report(s) in the computation period (non-reporting penalty is added to the tax rate).

Early each year, the UI issues its Tax Rate Determination for Calendar Year 20__, Form UIA 1771. It shows an employer's prior Actual Reserve, benefits charged, and contributions paid (basis of the CBC and ABC components) since the last annual determination, and the employer's new Actual Reserve.

It also shows the employer's 12-month total and taxable payrolls, and the Required Reserve, as well as the employer's 36-month taxable payroll, and the benefit charges in that 36-month period. It then shows the calculated amount of each component of the tax rate, and the total tax rate itself.

Sample calculation for Unemployment Insurance (UI) tax rate using example numbers from a fake Form UIA 1771:

Example continued: 32,869.00 ÷ 2,972,332.91 =.0110 = 1.1%

The result is rounded to the next higher 0.1% (In this example, the fourth decimal place was a "zero," and no rounding was done).

Example continued: 91,082.68 – 41,991.80 = 49,090.88 ÷ 2,428,871.34 = .02021 × 0.5 = 0.0101 = 1.10%

If there is any remainder (as there is here with the "1" in the fourth place to the right of the decimal), the result is rounded up to the next higher 0.1%.

This component is generally a flat 1.0% for all contributing employers with three or more years in business. However, for employers with no, or very few, benefit charges the NBC can gradually become as low as 0.06% (6/100).

Unemployment Tax Rate

For an employer account established during or after 2013 with three or more years of liability, or an account established during or before 2012 with five or more years of liability, the unemployment tax rate is computed by adding together the three components:

CBC (1.1%) + ABC (1.1%) + NBC (1.0%) = 3.2% Unemployment Tax Rate

For accounts with one and two years of liability:

• Generally, in the first two years of a business's liability, the tax rate is set by law at 2.7%.
• Note: There is an exception for employers in the construction industry, whose rate in the first two years is that of the average employer in the construction industry, which is announced by UIA early each year. In recent years the average construction rate is from 5.3% to 8.1%.

For an employer account established during or after 2013 with three or more years of liability, or an account established during or before 2012 with five or more years of liability: 

The unemployment tax rate is computed by adding together the three components:

1. Chargeable Benefits Component (CBC)
2. Account Building Component (ABC)
3. Nonchargeable Benefits Component (NBC).

The CBC and the ABC are affected by the employer's payroll, and the unemployment benefit charges to their account. Since these components reflect each company's experience, they are known as the experience components, and the entire taxing computation is known as experience rating.

You can view your current tax rates in MiWAM: Log in to your MiWAM account and go to “Recent Items” to view your Form UIA 1771 under "All Letters." Here you can review your tax rate and your history.

The computation period covers the 3rd, 4th, 1st, & 2nd quarters.

For instance, the computation period for the 2023 rate year will cover

• 3rd & 4th qtrs. 2021
• 1st & 2nd qtrs. 2022

The wages & contributions along with benefit charges are used to compute your Tax Rate.

Your tax rate is in effect from 1/1 to 12/31 (all quarters in the calendar year).

SUTA stands for the State Unemployment Tax Act, a state law requiring employers to pay a state tax on employee wages to fund unemployment benefits. 

• State unemployment taxes paid by employers to the UIA are used only for the payment of unemployment benefits to Michigan workers. 

The quarterly reports are due the 25th of the month it is due. Below they are outlined. Reports and payments not submitted timely result in penalties. After the due date there is a $55 non-reporting penalty that will be assessed to the account. If the 25th is a weekend the reports are due the Monday after the 25th. 

For step-by-step instructions on how to use MiWAM, including how to file your Employer’s Quarterly Wage/Tax Report or make a payment, view the MiWAM Toolkit for employers.

If you buy 75% or more of an existing business or its assets, you automatically inherit its unemployment tax responsibilities. This process is called successorship. It applies whether the purchase happens through a sale, lease, merger, foreclosure, or bankruptcy.

As the new owner, you take on:

• The business’s unemployment tax rate and history.
• Any outstanding unemployment tax liabilities (but only up to the value of the assets acquired).

Checking for UI tax liabilities before buying:

• To avoid surprises, the buyer can request a Clearance of Account from the seller that is issued by UIA at least 10 days before the sale. This verifies if the business owes any unemployment taxes.

Additionally, sellers must provide buyers with Form UIA 1027, which includes (in case the seller does not have record to provide the information related to the UIA,1027, then UIA can issue UIA 1346, Disclosure of Account, to the seller upon request):

• The business’s unemployment tax rate.
• Any outstanding UI tax liabilities.
• A list of laid-off employees from the past year and current employees.
• Important: Failing to provide this information can result in civil or criminal penalties.

• 100% assets acquisition.
• Any acquisition of 75% or greater if not commonly owned.
• Any acquisition from 0% to 99% if the business is commonly owned.

When a business inherits UI tax history, it also takes on:

• Benefit charges paid to former employees.
• Past unemployment tax payments made by the previous owner.

In 100% acquisition, the buyer will inherit the total experience rating of the previous owner. When it’s partial sale of the business, only part of the payroll transfers (e.g., 60%), then only 60% of the unemployment experience (tax rate, payments, benefit charges) moves to the new owner. The UIA calculates a new tax rate based on both the transferred history and the new employer’s own payroll data.