Michigan Employer Advisor: January 2025

Taxable Wage Base Will Be Reduced to $9,000 in 2025

The Taxable Wage Base (TWB), the amount of employee wages an employer is taxed on to support the state’s unemployment program, is going down for most employers this year.

Qualifying contributing employers will see the TWB drop from $9,500 per employee to $9,000 per employee, as set by the Michigan Unemployment Insurance Agency (UIA). The TWB can change if the unemployment insurance trust fund reaches at least $2.5 billion in successive quarters the previous year.

To qualify for the taxable wage base reduction, an employer must be in good standing, which means all quarterly tax reports are submitted and there are no missing reports or estimated reports. Also, an employer cannot be delinquent, which means they have an unpaid balance of $25 or more in tax, penalty or interest.

If you are missing a tax report or have an unpaid balance, you still have a chance to qualify for the TWB reduction. You will receive a UIA Form 6354 Notice of $9500 Taxable Wage which will allow you to resolve the account discrepancy.

Update your account so you can take advantage of the TWB reduction and pay less taxes for calendar year 2025.

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Four Factors Influencing Your Unemployment Insurance Tax Rate

The Taxable Wage Base (TWB) and employer unemployment insurance tax rates are two different things. The TWB is set in statute, but an employer’s tax rate is computed by the Michigan Unemployment Insurance Agency (UIA).

The tax rate is the percentage employers pay on the TWB for each employee they have. UIA mailed at the end of December to all Michigan contributing employers a UIA Form 1771 Tax Rate Notice for the 2025 calendar year.

There are three components to setting a business’ tax rate: Chargeable Benefits, Nonchargeable Benefits, and Account Building. All three calculations added together make up the tax rate.

Several factors can affect an employer’s 2025 Tax Rate.

Did You Have Unemployed Workers?

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 UIA. You must protest the information you received from UIA about the individual who received unemployment benefits. Benefit charges cannot be protested through your tax rate.

If you disagree with a tax rate increase and 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 of the benefit credit being mailed to you.

Did the Total Gross Payroll for the Computation Period Change?

The amount you are required to have 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 percent. 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 the Total Gross Payroll for the Computation Period Change?

The amount you are required to have 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 percent. 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 buy 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 three 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.