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Michigan Goes After Unemployment Fraud Too

January 4th, 2007 Posted by Mark

Remember that blog entry a few minutes ago, the one you fastidiously read about how Colorado is now taking a new no nonsense approach to a form of unemployment insurance fraud called SUTA dumping? Well, it turns out that the state of Michigan is doing the same thing. The reason is not that Michigan is jealous of Colorado’s beautiful mountains and wanted to try to get the upper hand on the Rocky Mountain state in some way, any way, possible.

No, the reason turns out that the federal government is stepping up pressure on all states, Michigan and Colorado, included, to put a halt to this form of unemployment insurance fraud. The federal government wants states to close all possible loopholes that employers could have to avoid paying their fair share of unemployment insurance taxes.

The Michigan legislature, last I checked, was taking a look at passing laws to make the federal government happy about the SUTA dumping issue. The Michigan officials are quick to point out, though, that they have already made many forms of SUTA dumping and other forms of unemployment insurance fraud illegal in their state. The new law, nonetheless, would finish off any loopholes in the current labor laws in the state, and make sure that the Michigan Unemployment Insurance Agency, or UIA, has the full authority to pursue illegal employers and prevent them and punish them for any violations of the labor laws that they are committing.

SUTA dumping, if you remember, in general occurs when an employer starts up another business or entity, for the sole purpose of cheating the unemployment insurance system. It works because the employer moves his employees, on paper, to this ghost company, thereby reducing the unemployment taxes on his real business. It is far more complicated than that, but I am a human resource expert, not a tax accountant.