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Taxable Wage Base
Q. What is a taxable wage base?
A. Contributing employers covered under the Michigan Employment Security (MES) Act are required to pay unemployment insurance taxes on their employees' wages. The taxable wage base is the amount of an employee's wages that is taxed by the Unemployment Insurance Agency each calendar year and is payable by the employer.
Q. How much is the taxable wage base?
A. The taxable wage base is $9,500. The MES Act provides for a reduced taxable wage base if the UIA Trust Fund balance reaches or exceeds $2.5 B for two consecutive quarters.
Q. What is the current taxable wage base?
A. In 2020, the Trust Fund balance fell below $2.5B, therefore, the taxable wage base is $9,500.
Q. What does this mean for my business?
A. Contributing employers must pay taxes on the first $9,500 of each employee’s calendar year wages.
Q. How does the taxable wage base affect my organization’s unemployment tax liability?
A. Your Michigan tax liability has the potential to increase over prior years when the taxable wage base was $9,000 due to the current year’s increase.
Q. Will the $9,500 taxable wage base be reflected in my tax account when my quarterly reports are filed?
A. Yes. The correct taxable wage base will be reflected in your tax account at the time your quarterly wage/tax reports are filed.
Q. I am a third-party payroll provider. Does the change in the taxable wage base mean I may have to make internal programming changes to my system?
A. Yes. You will need to ensure that the applicable taxable wage for 2021 is set at $9,500 to ensure employers pay the correct amount of taxes to avoid any interest accrual due to underpayments.