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A Newsletter for Employers January 2025 |
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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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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.
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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.
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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.
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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.
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If you have 2024 tax
rate questions or need assistance, call the Office
of Employer Ombudsman at 1-855-484-2636 and select Option 4.
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Most returned mail is received by the Michigan Unemployment Insurance Agency (UIA) after it mails out the annual Form 1771 Tax Rate Notice.
Employers and third-party administrators (TPAs) must make sure unemployment insurance accounts are updated with accurate mailing addresses.
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Employer: It is your responsibility to notify UIA if the business’ address has changed. You can go into the Michigan Web Account Manager (MIWAM) to update the address.
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TPAs: If your address has changed, then it must be updated, too. A TPA with mail permissions receives mail for their employer client. Therefore, it’s imperative to have the correct address on record to prevent the Postal Service from returning mail to UIA. Also, if you are no longer servicing a client, then the arrangement must also be terminated in your MIWAM account or through file update.
TPAs should know that if they do not update their address, mail permissions will be removed when UIA receives returned mail.
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An employer audit by the Michigan Unemployment Insurance Agency (UIA) is a systematic examination of an employer's books and records.
It is performed using accepted auditing standards and procedures, that covers a specific timeframe.
An audit accomplishes five things:
- Determines the taxable amounts, of payments, made by an employer for labor and the contributions that should be paid in unemployment insurance.
- Reconciles audit findings with amounts the employer has reported to UIA, if any.
- Determines interest and/or penalties due under what we call the Michigan Employment Security (MES) Act.
- Determines, if necessary, the employer's financial ability to meet tax obligations.
- Provides a cost-effective method of promoting employers understanding of employer rights and responsibilities under the MES Act.
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UIA’s Field Audit team has received 100 percent scores on employer audits from the U.S. Department of Labor for five years in a row, from 2019-24.
This means our auditors meet the reasonable assurance of quality benchmark set by DOL.
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An audit includes the following minimum requirements: an interview; a review of at least four calendar quarters; verifying the business entity; a review of document records examined, and evidence obtained in tests used to verify payroll, procedure, accuracy, and completeness; a search for misclassified workers and payments; a closeout conference; and a written final report.
After the conclusion of the audit, an employer will be asked to complete a post-audit survey.
The survey helps management assess the audit program by providing feedback on how the audit was conducted. Approximately 30 percent of employers agree to take the survey.
Some employer reactions to the UIA audits:
- “The auditor was extremely helpful in clarifying the entire process and being polite and pleasant to work with.”
- “Very patient, knowledgeable, informative and accommodating with scheduling conflicts. Good follow through and allows for a comfortable exchange in what could be considered difficult circumstances!”
- “The auditor was professional and extremely detailed! She followed up on everything needed in a timely manner.”
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We Want to Hear from You
If you want to suggest an article or topic for a future edition of the Employer Advisor newsletter, or just want to tell us how much you enjoy reading it, please send a message to UIA-EmployerAdvisor@Michigan.gov.
You can find past issues of the newsletter on the Employer Homepage at Michigan.gov/UIA.
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