FUTA Tax Increase for Michigan Employers
Michigan employers will be paying a higher federal unemployment tax rate again for 2011. The tax will be increased another .3%, for a total tax of 1.7% on the first $7,000 of wages paid to each employee in the calendar year. This tax increase applies to all Michigan employers with the exceptions of Indian Tribes, non-profit organizations and governmental entities.
Employers pay FUTA on the first $7,000 of each employee's annual wages. The FUTA tax is a flat rate of 6.2%, but employers who pay their state unemployment tax timely and in full receive a 5.4% credit. Therefore, the net FUTA rate is normally 0.8%. However, federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. This is the case for Michigan and there are additional states that now have outstanding federal loans as well. The net result of the reduction in the FUTA tax credit is a tax increase for Michigan employers.
The FUTA tax will be adjusted to reflect this increase for all current payroll clients of Heintzelman Accounting Services.
All other employers should notify their payroll service provider or payroll department of this change.
Please stay tuned for future updates.