Michigan’s 2021 Unemployment Tax Form Arrives, Even as Benefit Waivers Persist

This could leave some taxpayers struggling with reportable income on 2021 federal and state taxes that they may have to return later in the state.


Some wonder how many residents could face wage garnishment or tax refunds if they are later ordered to repay overpayments, even though they obtained benefits in good faith and applied for reimbursement waiver.

“If I was someone who collected benefits in 2021, I would be very upset and very confused,” said David Blanchard, an Ann Arbor attorney who filed a class action lawsuit against the Insurance Agency. unemployment for changing the eligibility rules for benefits one year after the payments. have been done.

“The state thinks you owe it, but you have to record it on your taxes as money received,” he said. “And then it could be waived, too.”

The UIA received a federal extension in January, allowing it to delay the distribution of Forms 1099-G — which report income received from a government entity — by one month.

The UIA said on a webpage that the delays are “caused by corrections that need to be made to ensure the accuracy of the statements. In addition, waivers granted in 2021 contribute to the delay.

Most recently, the agency announced that it had received approval from the U.S. Department of Labor to expand eligibility for waivers for workers receiving pandemic benefits who were later determined to be in error.

For Michigan residents, the Form 1099 delay has reduced the time for people who received unemployment benefits in 2021 to file their taxes.

“Without the 1099, workers are forced to make a choice between filing their tax returns without the 1099 and filing an amended one later, which (the US Treasury) frowns upon, or waiting and filing after they receive it,” Lisa Ruby, public benefits attorney at the Michigan Poverty Law Clinic, which advocates for low-income residents, told Bridge Michigan.

“It’s a problem for low-income families who have other credits coming, like the home heating credit and the earned income tax credit,” she said. “These households rely on that income.”

Democratic and Republican state lawmakers continue to monitor the progress of the embattled UIA, which is led by its third director in a year. During the pandemic, the agency ignored federal payment eligibility guidelines, failed to adapt its cumbersome IT system and faced widespread backlash for not being accessible or responding to an avalanche of unemployed workers as the virus first tore Michigan apart, shutting down businesses and disrupting the economy. .

As more than 3 million people sought unemployment assistance, the agency’s failures “tripped people in a million different ways,” said State Sen. Jeff Irwin, a Democrat from Ann Tree. Slow payments, lost paperwork, rule changes and more continue to be problems for the UIA and sources of frustration for those caught up in it, he said.

So far, Irwin said, his office has had a few calls from people worried about their tax forms and obligations.

“I’m afraid that, much like the problems we have with unemployment in general, a few calls now will become hundreds of calls later?” he said.

Rep. Steve Johnson, a Wayland Republican and chairman of the House Oversight Committee, said he was also concerned about an increase in calls to his office from people asking for restitution claims.

“There just seems to be a myriad of issues.”

Here’s what you need to know now about the UIA, tax forms and exemptions:

Who gets a refund waiver remains unclear

The state has not yet determined when it will resolve the number of restitution waivers it will issue, or how many people will have to repay the benefits.

State accounting shows $8.5 billion in unemployment benefits it shouldn’t have paid since the start of the pandemic, including $2.8 billion paid in fraudulent claims, according to a recent audit .

The remaining $5.7 billion represents claims that were later ruled ineligible due to rule changes, UIA error or other reasons. At least 758,000 unemployment claims had to be reviewed and approved after the state revealed it did not initially follow federal guidelines. About half have received refund waivers so far.

The agency has not yet specified how many of those claims have yet to be resolved.

The recent federal labor ruling will allow the state to issue more waivers, but many details remain up in the air, including when a person will learn that a waiver has been granted.

UIA spokesman Nick Assendelft told Bridge this week that the state is reviewing the 40-page federal document on which people who received pandemic unemployment assistance and other temporary programs until last September are eligible for an exemption. About 70% of the 3.46 million residents who filed for unemployment during the pandemic received temporary benefits.

“We have to go through and make sure we fully understand what the guidelines are and how they might apply,” Assendelft said, “and then we have to go through our system and see who all of this would apply to.”

Meanwhile, the UIA’s fundraising efforts continue

Some people who were told to return unemployment benefits are now facing wage garnishment. Others worry that tax refunds will also be garnished, even if they dispute a ruling on an overpayment or expect a refund waiver.

UIA Director Julia Dale told state lawmakers during a joint oversight hearing in mid-January that the state was considering both waivers and halting collections on too many -paid.

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