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Reduction in Taxable Wage Base Means Michigan Employers Pay Less in Unemployment Taxes

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The Unemployment Insurance Agency, which operates Michigan’s unemployment insurance program by collecting unemployment taxes from employers, recently announced that businesses will pay less in unemployment taxes due to a reduction in the state’s Taxable Wage Base starting in the third quarter of 2015.1 This reduction only applies to contributing employers who pay unemployment taxes and are not delinquent in unemployment contributions, penalties or interest payments.2

According to a statement by the Michigan Talent Investment Agency, “the Taxable Wage Base is the annual amount of wages paid by an employer to an employee that are subject to state unemployment insurance taxes. These contributions fund unemployment benefits for employees who lose their jobs through no fault of their own.”3

Beginning in October, Michigan’s Taxable Wage Base will decrease from $9,500 to $9,000, saving businesses about $16 million in taxes in 2015.  If the Taxable Wage Base stays at $9,000 in 2016, $57 million less will be assessed.4

This decrease is a result of legislation passed in 2011, which states that when the Unemployment Trust Fund balance reaches $2.5 billion, and remains at that level for two consecutive quarters, the Taxable Wage Base automatically decreases to $9,000.5

In the same statement, Governor Rick Snyder said this decrease is good news for job providers, families and Michigan’s economy. By saving money on taxes, businesses can find additional opportunities to retain jobs and hire more employees.6

 According to the American Payroll Association’s PayState Update, two other states have also lowered their Taxable Wage Base in 2015. Florida lowered theirs from $8,000 to $7,000 and Oklahoma from $18,700 to $17,000.7

However, Michigan’s Taxable Wage Base amount is not set at this level permanently. If the Trust Fund balance falls below the $2.5 billion mark, the taxable wage base limit will have to increase to $9,500.8
 
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The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.

1, 2, 3, 4, 5, 6, 8 http://www.michigan.gov/documents/tia/Taxable_Wage_Base_073015_495701_7.pdf

7 http://www.americanpayroll.org/members/stateui/state-ui-2/

 

 

 



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