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What happens to state and federal unemployment tax payments?

The state unemployment taxes employers pay to the UIA are used only for the payment of unemployment benefits to Michigan workers. All regular state benefits are paid from these taxes, as are half of any Extended Benefits paid to former employees. These regular and extended benefit payments are usually charged to the employer's account. However, in most cases, if a claimant was disqualified for benefits when he or she left work, and then requalifies and is paid benefits, the benefits will not be charged to the employer's account.

The federal unemployment taxes paid to the Internal Revenue Service (Form IRS 940), are used to pay the costs of administration of the unemployment insurance and Job Service programs in all states. It also pays the federal share of Extended Benefits, and is used to build a fund from which states may borrow, if necessary, to pay benefits.

Related Content
 •  Purpose of this overview
 •  What is Unemployment Insurance?
 •  Employers pay either contributions (taxes) or reimbursements
 •  Who is required to pay unemployment insurance taxes?
 •  Which employees are covered by Unemployment Insurance?
 •  How much is the Unemployment Insurance Tax?
 •  How is the unemployment tax rate computed?
 •  Chargeable Benefits Component (CBC)
 •  Nonchargeable Benefits Component(NBC)
 •  Account Building Component (ABC)
 •  Across-the-Board Tax Reduction
 •  What is the tax rate when a new owner acquires an existing business, or businesses merge?
 •  Unemployment taxes under the Federal Unemployment Tax Act (FUTA)
 •  Notification of state unemployment tax
 •  How and when to pay your unemployment taxes
 •  Effect of Missing Tax Report(s)
 •  Protest/Appeal Rights
 •  Tax Office Contacts
 •  Sample calculations
 •  What address should employers use to submit their tax reports and payments?
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