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Unemployment insurance » Michigan GOV UIA Help

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Michigan Unemployment Benefits and Your Taxes

The money you receive from the Michigan Unemployment Insurance Agency is, unfortunately for unemployed workers, taxable. This means that a percentage of your weekly benefits needs to go toward your end of year taxes to the Internal Revenue Service.

The Michigan Unemployment Insurance Agency makes calculating your tax liability easy by sending unemployment insurance claimants a 1099 form. This year the form will be ready by available online by February 1, 2012. The 1099 form will have the total benefits you received during the previous tax year. Simply add this to the income you declare in your tax return.

If you did not know you had to pay taxes on unemployment benefits or if you did not have the foresight to save for your tax bill, this may cause serious financial problems to you and your family. One way to avoid the surprise of a large end of year tax bill is to withhold a percentage of your benefits each week. You can either do this yourself by putting aside your estimated federal and state tax liability each week or ask the Michigan Unemployment Insurance Agency to withhold it for you. The Michigan UIA currently deducts 10 percent for federal taxes and 4.35 percent for state taxes. 

This is especially beneficial for claimants find it hard to save because the money is deducted automatically from your weekly benefit. You can request the unemployment insurance agency do this when you first claim for unemployment benefits.

If you opted-out of withholding taxes when you first claimed for benefits, you can still apply for this service by filling a UIA 1281 Income Tax Withholding form. Click here to view the Income Tax Withholding form.

The form is short and simple to fill in. It simply requires your Social Security Number, full name and a phone number to confirm your identity and have a way to contact you. Just tick the “Start withholding 10 percent Federal Income Tax and 4.35 percent for Michigan Income Tax” box, write the number of exemptions you plan to claim in your next state tax return, sign and date the form and you are good to go.

On the other hand, if the Michigan unemployment office is withholding taxes from your benefits and you want this to stop, you can use the same form to cancel this service. To do this just tick the “Stop withholding income taxes from my unemployment benefits” at the end of the document.

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