Michigan Unemployment Tax Credit Provides Opportunity – October 21, 2013 by Tracy Monroe

Michigan companies who have had a positive reserve balance in their state unemployment account for five years or more may be eligible to receive up to a 50% credit on the additional amount of federal unemployment taxes (FUTA) paid.

Intended to ease the burden on employers who have to pay additional FUTA taxes, the credit is available for the 2010, 2011 and 2012 tax reporting years. This is a non-refundable and non-transferable credit that can only be used against future Michigan unemployment tax liabilities.

The actual credit will be the lesser of:

  1. 50% of the additional FUTA tax paid by the employer for the previous year, or
  2. the employer’s taxable wages for the previous calendar year multiplied by the Nonchargeable Benefits Component of the employer’s unemployment tax rate for the year.

Employer Eligibility

To be eligible the employer must meet the following criteria.

  • Be in business for five years and have paid Michigan unemployment taxes for five years or more
  • Be a positive reserve balance employer at June 30th of the previous calendar year for each year that the credit is available (2010 reporting for 2009, 2011 reporting for 2010 and 2012 reporting for 2011 – three separate applications are required)
  • Filed quarterly tax reports for the year prior to the year taking the credit
  • Paid additional FUTA taxes on IRS Form 940 by December 31st of the year prior to the year taking the credit
  • Certified the amount of the additional FUTA taxes paid for each of the applicable years

Applying for the Credit

Businesses can apply for the credit via the Unemployment Insurance Agency (UIA) Michigan Web Account Manager (MiWAM) or by completing Form UIA 1110. The following information will be needed when you apply.

  • UIA account # for Michigan (7 digits)
  • Michigan annual rate determination found on Form UIA 1771 for 2009, 2010 and 2011
  • Michigan taxable wages as reported on the UIA quarterly tax reports for 2009, 2010 and 2011
  • FUTA return for 2009, 2010 and 2011

This credit provides a tax-savings opportunity that is worth checking out for those who may be eligible. Contact Tracy Monroe at tmonroe@cohencpa.com for more information.

 

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.