Michigan employers special FUTA handling
Tuesday, January 19, 2010
Michigan lost their FUTA tax credit with the Federal government resulting in a penalty of 0.3%. This makes the FUTA rate for Michigan employers 1.10% for 2009. The penalty is actually entered into a separate line on the 940 return.
Before you make any changes to the FUTA tax experience factor in Abra for 2010 payrolls - please consult your tax professionals. Michigan was in default for the year 2009 and will probably be in default in 2010 and 2011 as well, but that final determination has not been made as yet. The 940 instructions only talk about 2009 and what you need to do to calculate the amount for the penalty for that year.
If your tax professional advises you to change the rate and you need to make adjustments in the Abra tax code you could enter 0.011 (or 0.014 if you want to add the expected 2010 penalty) instead of the 0.008 which is currently there. Another way to track this would be to set up a separate tax code for the FUTA Penalty. This will accrue the penalty separately for you and also solve a problem if you also pay in other states besides MI. If you have run payrolls for 2010 already without the change and want to post the additional liability for the period or if you need help setting up the new tax code, please contact us for assistance.