AUGUST 18, 2006 – Michigan’s Unemployment Insurance Agency (UIA) has collected approximately $35,000 in unpaid unemployment taxes and interest from two employers.

The two employers improperly reported organizational changes, resulting in reduced liability for their state unemployment taxes.  As a result of the incorrect reporting, the firms were not assigned the proper tax rates.  Upon investigation, it was determined they had engaged in a practice known as SUTA (state unemployment tax act) Dumping.

“When employers SUTA Dump, they typically shift employees from their existing high-rate tax accounts to new lower-rate accounts,” Douglas J. Kalinowski, acting deputy director for the Department of Labor & Economic Growth, explained.  “They generally shift their employees in order to pay less in unemployment taxes.”

The first employer, an out-of-state marketing firm with staff in Michigan failed to provide UIA with complete information, which caused the firm to incorrectly receive a lower “new” employer unemployment tax rate.  When this was discovered, the agency notified the employer it owed the unemployment trust fund $7,200 in unpaid taxes and interest.

With the second business, an employee leasing company, UIA discovered it had several tax accounts, instead of the single consolidated account its situation warranted.  Consequently, the agency determined that the company owed the trust fund $28,200 in unpaid taxes and interest.

“In both cases, once we notified the employers that their improper reporting had resulted in lower tax rates than what they were entitled to, they acted quickly to pay what they owed,” Liza Estlund Olson, acting UIA director, said.

“We work to ensure that all employers comply with the requirements of the Michigan Employment Security Act to maintain the solvency of the UI trust fund and to make certain that all employers pay their fair share of taxes,” Estlund Olson said.

Unemployment taxes are based on an employer’s layoff experience and are paid into the state’s UI trust fund from which unemployment benefits are paid to eligible, unemployed Michigan workers.