This morning I looked at a Service Bulletin we penned in October of last year, barely eight months ago, in which we stated: “Michigan is the only state with an outstanding federal loan (to its state unemployment trust fund) as of today, which is currently over $283 million. However, the timing of the loan was such that there can be no FUTA tax increase on Michigan wages until 2009 at the earliest.”
Boy how things have changed. The Michigan trust fund loans now exceed $2 billion, and fourteen additional states now have outstanding federal loans totaling more than $6.6 billion.
Unless future legislation provides relief, Michigan employers will pay an additional 0.30% federal unemployment tax for 2009, making the net federal unemployment tax rate 1.10%. The FUTA tax increase (euphemistically called a “credit reduction”) will trigger on by law if the Michigan unemployment compensation trust fund has an outstanding balance due on November 10, 2009, which will surely be the case.
Michigan is the only state where a FUTA credit reduction may take effect for 2009. FUTA tax for the first three quarterly tax payments for 2009 should be calculated and paid at the normal 0.80% FUTA tax rate. The additional tax due (assuming the rate increase takes effect) will be payable with the fourth quarter deposit, due on January 31, 2010.
Click here for a Fact Sheet from the Michigan Unemployment Insurance Agency on this topic.
As always, please feel free to contact us at 615/242-8246 if there are any questions.