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.