Michigan Salary Paycheck Calculator
Processing payroll in Michigan is relatively straightforward. However, complying with the various city income tax laws makes withholding and paying withholding taxes complicated. We will help you with the knowledge you need to calculate your employees’ paychecks and your payroll taxes correctly. Here you will find answers to the most frequently asked Michigan payroll questions.
Michigan payroll taxes
Does Michigan have a personal income tax?
Answer: Yes. Michigan imposes a flat withholding tax rate of 4.25%.
How do I know how much to withhold from the paychecks of my employees?
Answer: Withholding amount is based on the number of exemptions that an employee claims.
Your employees will fill out Form MI-W4, Employee’s Michigan Withholding Exemption Certificate, which will tell you how many exemptions they will claim. You’ll deduct the value of the exemptions from the worker’s pay and then withhold 4.25% of the taxable amount.
Employees working in Detroit will also provide you with a completed Form DW-4, Employee’s Withholding for City of Detroit Income Tax.
If your employee doesn’t provide a Form MI-W4, you’ll need to withhold tax as if the employee is single and as though no exemptions were claimed.
Do my employees need to fill out a Form MI-W4 each year?
Answer: No. A new Form MI-W4 is only required when the number of exemptions changes, which may change the employee’s tax amount. Employees need to provide a new form to you within ten days of the change so you can promptly adjust the withholding.
When do I need to pay the Michigan withholding tax to the state?
Answer: You will pay monthly or quarterly depending on how much tax you withhold each month. You will be notified by the Michigan Department of Treasury how often you will file and pay taxes.
Besides paying the tax, are there other forms that I have to file?
Answer: Yes. You’ll need to file payroll tax returns on Form 5080, Sales, Use and Withholding Taxes Monthly/Quarterly Return.
All employers must file an annual summary report on Form 5081, Sales, Use and Withholding Taxes Annual Return. Form 5081 is due by the last day in February for the prior year.
If you have Detroit employees, you will also need to file Form 5321, City of Detroit Income Tax Withholding Annual Reconciliation. The form and payment for any city taxes are sent to the Michigan Department of Treasury.
Does Michigan have an unemployment tax?
Answer: Yes. Employers must pay Michigan unemployment tax on the initial $9,500 of wages earned by an employee each year. Most businesses start with a 2.7% tax rate. But if you’re in the construction industry, rates generally start between 6.8% and 8.1%.
Just like with the withholding tax, you will need to file a report and pay the tax.
Unemployment tax in Michigan is paid by the 25th of the month following each quarter. Reports are required even if no wages were paid or no tax is due.
Does Michigan have any local taxes?
Yes. The Michigan cities listed below levy an income tax on residents and nonresidents who work there. These taxes are typically 1% income tax on residents and .5% on nonresidents. The cities of Detroit, Grand Rapids, Highland Park and Saginaw have rates that differ from the rest.
Business owners must register with the city/cities where your employees are working—and registration in each city is unique. Each city below is linked to the form that needs to be filled out and mailed in to register your employee(s).
- Albion – download the City of Albion Employer Registration Packet under Withholding
- Battle Creek
- Big Rapids
- East Lansing
- Grand Rapids – download SS-4 Withholding Registration under Withholding Forms
- Highland Park
- Hudson- please call the city at (517) 448-8983
- Muskegon Heights – choose current year and download Tax Withholding Book
- Port Huron
A quick note for Gusto customers: if you have multiple business locations in Michigan, each of your employees will have a “Predominant Work City” field in their Gusto profile. Employees must identify
What is the salary threshold in Michigan?
Because the state of Michigan doesn’t have its own salary threshold, it adheres to the federal salary threshold, which is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
Is Workers’ Compensation insurance required in Michigan?
Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
Are there other Michigan paycheck rules and laws I should know about?
Answer: Yes. Bear in mind these paycheck rules.
New hires – You will need to report new hires or rehired employees to the state within 20 days of employment.
Final paychecks – When an employee resigns or is let go, you must provide the last paycheck by the next regularly scheduled payday.
Paid Medical Leave – Employers must provide Paid Medical Leave to eligible employees. The benefit is a minimum of 40 hours a year and accrues at 1 hour for every 35 hours worked.
Federal payroll taxes
Please explain how FICA tax works.
Answer: The Federal Insurance Contributions Act, or FICA tax, is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
|Medicare tax||1.45% on each employee’s wages each year|
|Social Security tax||6.2% on the initial $147,000 of each employee’s wage in 2022|
Do I need to withhold federal income tax from my employees’ pay?
Answer: Yes. Unless an employee is exempt from federal income tax. They will inform you whether they are exempt when they provide you with a completed Form W-4.
Your employees should complete Form W-4 before they begin working for you. The information on Form W-4 will determine how much tax to withhold from your employee’s wages. Tax filing status and the number of dependents determine how much tax is withheld.
You don’t need to send the forms to the IRS—keep the W-4 documents with your payroll records.
Are there other federal payroll taxes I need to pay?
Answer: You’ll need to pay federal unemployment tax, and some employees may need to pay the Additional Medicare tax.
Additional Medicare tax
Employees earning more than $200,000 per year may need to pay the Additional Medicare tax. You will need to withhold 0.9% on employee earnings greater than $200,000.
Federal unemployment tax
Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but most employers only have to pay 0.6% each year.
How do I pay these federal taxes to the IRS?
Answer: The Internal Revenue Service requires you to pay these taxes annually, quarterly, monthly, or semi-weekly depending on how much taxes you owe.
FICA, federal income tax, and Additional Medicare tax are paid most frequently, either monthly or semi-weekly. Annual or quarterly payments are not an option. Each quarter you will provide a summary on Form 941.
Federal unemployment tax is paid annually using Form 940. Quarterly payments are required for employers with a tax due of $500 or more.
Hopefully, you’re feeling good about processing your Michigan payroll. Check out Gusto’s Michigan Salary Paycheck Calculator. If you still need some guidance, call on a qualified professional to help you.