Businesses With Employees
in Michigan Get Extra Time

WASHINGTON - Business that pay federal unemployment tax (FUTA) on wages to employees in Michigan have until June 30, 1992 to pay any additional FUTA amount that is owed because of overdue unemployment insurance loans made by the federal government to the State of Michigan.

The Internal Revenue Service said that the extension of time to pay is contained in the Emergency Unemployment Compensation Act of 1991 Extension signed into law by the President on Feb. 7, 1992.

FUTA usually is paid by employers at the effective rate of eight-tenths of one percent of the first $7,000 of wages paid each employee, for a maximum of $56 per employee. This effective rate is achieved by providing employers a 5.4% credit against the statutory 6.2% FUTA rate.

For 1991, an effective FUTA rate of 1.6% applies to the first $7,000 of wages paid to employees in Michigan. Only employers with employees in Michigan are subject to this increased FUTA tax rate for 1991. The additional tax will repay funds Michigan borrowed from the federal government to pay unemployment benefits.

IRS said employers who elect to defer payment of the additional tax should be certain to send it to the IRS by June 30, 1992 with a letter of explanation including the employer's name, address and employer identification number.

The extension does not apply to filing Form 940 annual federal unemployment tax form or payment of the normal FUTA taxes, due for 1991 by January 31, 1992. Employers who have not yet filed Form 940 should be certain to report the additional FUTA amount on line 6, even though it need not be paid until June 30.

IRS said employers who receive a notice from the IRS before June 30 regarding non-payment of the additional tax should write on the notice that they elect the payment deferral under the Emergency Unemployment Compensation Act and return the notice to the IRS.

Although the extension legislation allows extra time to pay the additional FUTA without penalty, interest will be charged on deferred payments. After receiving payment of the tax, the IRS will send employers a bill for interest due.

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