Michigan Hourly Paycheck Calculator
Since you landed on this page, it probably means you are looking for help with payroll taxes for Michigan. Well, you’ve come to the right place!
We will help you with some of the main payroll taxes in Michigan so you know what you are getting into. If you’d rather have someone else do it, payroll software or qualified accountants can take the lead.
Payroll taxes in Michigan
Figuring out withholding taxes in Michigan starts with state income tax, which all residents pay.
Several cities, including Detroit, impose a city individual income tax, which you are responsible for collecting and remitting. The Michigan Department of Treasury processes Detroit’s returns and payments. Therefore, all returns and payments should be sent to the Department of Treasury.
Michigan income tax withholding
Unlike most states, Michigan uses a flat withholding tax rate of 4.25%. This rate applies to both single and joint filers.
Detroit residents pay a 2.4% withholding tax rate, and non-residents pay a 1.2% withholding tax rate.
To compute the amount of tax to withhold from employees’ pay, use Form MI-W4, Employee’s Michigan Withholding Exemption Certificate. How much you withhold depends on whether the employee is married, has dependents, has wages exempt from withholding, and whether the employee’s permanent domicile is in a Renaissance Zone. 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 should also fill out Form DW-4, Employee’s Withholding for City of Detroit Income Tax.
Your employees should complete federal Form W-4, Employee’s Withholding Certificate and Form MI-W4 before their first day of work. For employees who don’t complete Form MI-W4, withhold taxes as though they had claimed no exemptions. You must notify the Michigan Department of Treasury for those employees who claim ten exemptions or more or who claim exempt.
If an employee has a change in their situation that affects exemptions, they should complete a new Form MI-W4 within ten days.
Filing and paying Michigan withholding tax
You may have to pay monthly or quarterly depending on your filing frequency, which the Department of Treasury determines.
File returns with Form 5080, Sales, Use and Withholding Taxes Monthly/Quarterly Return. If you have more than 250 employees, you are required to e-file.
For the state of Michigan, file anfile annual an annual summary withholding report on Form 5081, Sales, Use and Withholding Taxes Annual Return. This form reconciles the amount of withholding tax you should have paid with what you paid.
If you have workers in Detroit, you will also need to file Form 5321, City of Detroit Income Tax Withholding Annual Reconciliation. This form is due by the last day of February. This form is sent to the Michigan Department of Treasury since they handle the returns and payments for the City of Detroit.
Michigan unemployment insurance
Currently, the first $9,500 of an employee’s earnings each year is taxable for unemployment insurance.
Unemployment rates start at 2.7% for the first two years for non-construction employers. Generally, construction companies will start with rates between 6.8% and 8.1%.
Each year the Michigan Unemployment Insurance Agency sends Form UIA 1771, Tax Rate Determination for Calendar Year, to each employer. This form includes all the calculations used to arrive at the employer’s unemployment tax rate.
Michigan requires you to file a quarterly wage and tax report, which lists your employees and the wages they earned for each quarter. Even if no tax is due, this report is filed by the 25th of the month following the quarter.
Employers’ wage and tax reports must be filed and paid through the Michigan Web Account Manager (MiWAM).
Federal payroll taxes
Michigan employers and employees pay various types of federal payroll taxes. You will remit four withholding taxes to the Internal Revenue Service:
- Additional Medicare tax
- Federal income tax
- Federal unemployment tax
Taxes paid by the employer and employee:
- Social Security and Medicare tax
Federal income tax
Use Form W-4 to calculate the amount of federal income taxes to withhold from your employees’ paychecks. Employees will complete this form when hired and when they have changes that could influence the tax they may owe.
Use the information on Form W-4 along with tax tables to compute the amount of tax to withhold. To make it easier on you, payroll software can help with the math by making the calculations for you.
File the W-4 away in case of an audit. There’s no need to send the forms to the IRS.
Additional Medicare Tax
Some employees may need to pay the Additional Medicare Ttax. If you have employees earning more than $200,000 per year, you’ll need to withhold 0.9% on the employee’s excess wages.
Social Security and Medicare tax
Known as FICA, the Federal Insurance Contributions Act of 1935 established Social Security and Medicare taxes.
For 2022, both the employer and employee pay 6.2% on the initial $147,000 of employees’ wages for Social Security tax and 1.45% on all wages for Medicare tax.
Federal unemployment tax
Employers must also pay federal unemployment tax (FUTA). Taxes are paid at 6% for the initial $7,000 of each employee’s wages each year. Federal credits can reduce the rate you pay down to 0.6%.
Filing and paying Federal payroll taxes
Depending on how much you owe, send the withheld taxes and your portion of FICA to the IRS monthly or semi-weekly. Each quarter you’ll need to do a summary report on Form 941.
For federal unemployment tax, if your tax is more than $500, you’ll pay quarterly. If your tax is less than $500 a year, pay the tax when you complete your annual summary report on Form 940.
Other Michigan paycheck laws
Here are some other paycheck laws in Michigan you should know about.
- New hires: Employers must report new or rehired employees within 20 days of hire through the Michigan New Hires Operation Center.
- Minimum wage: Michigan allows employers to pay $4.25 per hour for the first 90 days to train new employees aged 16 to 19. You can pay employees aged 16 to 17 at 85% of the minimum wage.
Michigan Minimum Wage
|Effective Date||18 or Older||16 to 17|
|January 1, 2021||$9.87 / hour||$8.39 / hour|
- Final paychecks: When an employee quits or is let go, pay them by the next regularly scheduled payday.
- Workers’ compensation insurance: In general, businesses with one or more employees must carry workers’ compensation insurance.
- Paid Medical Leave: You must provide your eligible employees with paid medical leave, which is accrued at 1 hour for every 35 hours worked.
- Overtime: Hourly employees need to be paid at least 1 ½ times their regular pay rate for all hours worked over 40 in a week.
You can quickly get started with Gusto’s Michigan Hourly Paycheck Calculator. With just a few clicks, you’ll see how easy it is to calculate your payroll taxes accurately.