Michigan Employer Advisor: January 2024

Four Factors that May Have Affected Your Business’ Tax Rate for 2024

At the end of December, the Unemployment Insurance Agency mailed its tax rate information for 2024 to all registered businesses in Michigan.

If the tax rate listed on the Determination of Tax Rate has changed, this may be why:

Did you have unemployed workers?
This may affect the three components (Chargeable Benefits, Nonchargeable Benefits, and Account Building) that are used to set a business’ tax rate. If the rate change is the result of benefit charges, and you agree with the charges, no further action is necessary. If you disagree with the benefit charges, you can file a claim/benefit protest with the UIA. You must protest the UIA 1136 or other correspondence you received regarding the individual who received unemployment benefits. Benefit charges cannot be protested through your rate. 

If you disagree with the tax rate increase and you have a claim/benefit protest pending, the tax rate won’t change until the disputed benefit claim/charges are adjudicated. Notify UIA if your tax rate remains unchanged after the claims/charges have been reversed. Your tax rate can be reconsidered by protesting the rate notice within 30 days after the benefit credit has been mailed.

Did the total gross payroll for the computation period change at all?
The amount required to be in reserve is determined by your total gross payroll for the computation period. This could increase or decrease your rate depending on your benefit charges. Your benefit charges, total gross payroll, and total taxable payroll are used to calculate the Account Building Component (ABC) portion of the tax rate. 

A small voluntary payment to the UIA can make a difference in your tax liability. It is generally not cost-effective to reduce the ABC by more than 0.1%. You can download the Voluntary Payment Worksheet on the UIA's Unemployment Insurance Taxes webpage. Use the worksheet to determine if a voluntary payment could benefit you. A voluntary payment is irrevocable. The payment cannot be refunded or applied toward taxes due. If paid, it must be received within 30 days of the mailing of the annual tax rate notice, called Tax Rate Determination for Calendar Year 20XX. 

Did your business change ownership or did you buy another business?
If you changed ownership or bought a business in 2023 or 2024, your tax rate could be affected. These types of changes affect all components of the tax rate. If you are planning to purchase a business, be sure to get a Disclosure of Account from the previous owner. This provides a five-year history of the company you are purchasing.

Are there missing Quarterly Wage/Tax Report(s) for the computation period?
If there are any missing reports during the computation period, it is important that you file them even if you cannot afford to make a payment. A 3 percent non-reporting penalty is added to the tax rate for failing to file. You have 30 days from the mailing of the annual tax rate notice to become compliant. 

If you have 2024 tax rate questions or need assistance, call the Office of Employers Ombudsman at 1-855-484-2636 and select Option 4.

Employers Must Report Wages to IRS to Verify UI Funds, Receive Tax Credit

Michigan employers can qualify for a federal unemployment tax credit if they pay their state unemployment tax. By the end of January of each year, employers must submit Form 940 to the Internal Revenue Service (IRS) to report their annual taxable wages for the previous year to receive the federal tax credit.

Under the Federal Unemployment Tax Act (FUTA), the IRS will verify with Michigan that the credit claimed by an employer on Form 940 was paid into Michigan’s unemployment fund in order for a business to receive the maximum FUTA credit.

If there is a discrepancy in the reporting on the Form 940, then the employer can request a recertification, Form 940-c, which includes:    

• Experience rate.
• Liability date.
• State reporting ID number.
• Year of the requested recertification.
• Experience rate period (Jan. 1 through Dec. 31).
• State taxable wages.
• Contributions paid before Feb. 1, between Feb. 1 and Feb. 10, and after Feb. 10.

Other can request a 940-Cert
When a Professional Employer Organization (PEO) requests a Form 940 certification for their clients, they must provide Form 6324, Certification by PEO Regarding Payment of Wages to Leased Employees.

This form establishes the PEO relationship before Form 940-c can be issued. The representation type must also reflect PEO-client access. A general power of attorney authorization means the PEO has the same rights as the employer.

Four Things to Keep in Mind

1. The employer reports the payments of the obligation assessment portion of the rate through calendar year 2019. That portion is excluded from the tax paid on Form 940-c.
2. If a company is sold in the middle of the calendar year, the buyer does not include wages paid by the seller. The taxable wage base is adjusted to include the wages from the previous employer.
3. Notify the UIA if the employer changes its Federal tax ID number (FEIN) in the middle of the tax year or reorganized its business structure.
4. The employer must verify that the FEIN on their State Unemployment Account is correct to minimize reporting errors. The UIA reports the Form 940-c by the FEIN.

Employers Should Start Thinking about Impact of UIA’s New Computer System

The Michigan Unemployment Insurance Agency’s (UIA) new unemployment insurance computer system is expected to be fully operational in 2025. It will replace the current Michigan Integrated Data Automated System (MiDAS)/Michigan Web Account Manager (MiWAM) system.

The new system will specifically provide employers and Third-Party Administrators (TPAs) more flexibility to submit wages to the UIA. Among the changes will be the ability to enter wages manually or copy information from previous quarters.

Employers can prepare for upcoming changes by:

• Logging into your MiDAS/MiWAM account and making sure the email address; mailing, physical, and business addresses; and any additional contact information is up to date.
• Informing internal departments (e.g., IT, Accounting, and Human Resources) about the new system and that more information will be released as the system is developed.

The UIA will be here to support external partners throughout the installation process. We'll do that by supporting effective change management, providing technical information, and regularly communicating impacts on employers as we work to improve your unemployment insurance experience.