FUTA Tax Increase for Michigan Employers

Most Michigan employers pay a 6.2% Federal Unemployment Tax (FUTA) on the first $7,000 of each employee’s wages during a calendar year. However, employers receive a credit to offset FUTA for state unemployment taxes paid, which in Michigan is generally 5.4%. This means that a Michigan employer usually pays $56.00 ($7,000 X .08%) in FUTA tax per employee each year.

Effective January 1, 2009, however, there is a 0.3% reduction in the FUTA tax credit available to Michigan employers, which reduction is intended to help repay the state’s outstanding federal loans. This means that Michigan employers’ FUTA tax liability for 2009 will increase to $77.00 ($7,000 X 1.1%) per employee.

What’s more, the FUTA tax credit available to Michigan employers will continue to decrease by an additional 0.3% for each succeeding year that the state has outstanding federal loans, resulting in an increased tax to Michigan’s employers of $21.00 ($7,000 X .3%) per employee each year until the state debt is repaid. Employers should plan accordingly.