(1) Beginning January 1, 1997, an individual filing a claim for unemployment benefits that establishes a new benefit year shall, at the time of filing the claim, be advised of all of the following:

    (a) That unemployment benefits are subject to federal and state income tax.

    (b) That some taxpayers are required to make estimated tax payments.

    (c) That the individual may elect to have both of the following deducted and withheld from his or her unemployment compensation payments:

     (i) Federal income tax in the amount specified under subchapter A of chapter 24 of subtitle C of the internal revenue code of 1986, 26 U.S.C. § 3401 to 3406.

     (ii) Effective with new claims filed on or after January 1, 1998, state income tax as provided in section 351 of the income tax act of 1967, Act No. 281 of the Public Acts of 1967, being section 206.351 of the Michigan Compiled Laws.

    (d) That the individual is permitted to change a previously elected withholding status only once in the individual’s benefit year.

    (2) If an individual makes an election to have money deducted and withheld from his or her unemployment compensation payments under subsection (1)(c), the commission shall, in accordance with section 351 of Act No. 281 of the Public Acts of 1967, withhold a tax in the same manner that an employer is required under the internal revenue code of 1986 to withhold a tax on the compensation of an individual. For a new claim filed after January 1, 1998, an election by an individual to have income tax withheld from unemployment compensation payments applies to both federal and state income tax. An individual may not elect to have only federal or only state income tax withheld for a new claim filed after January 1, 1998.

    (3) Amounts deducted and withheld from unemployment benefits shall remain in the unemployment insurance trust fund until transferred to the internal revenue service of the United States department of treasury, or to the state department of treasury, as appropriate, as a payment of income tax.

    (4) The commission shall follow all procedures specified by the United States department of labor, the internal revenue service of the United States department of treasury, and the Michigan department of treasury pertaining to the deducting and withholding of income tax.

    (5) Amounts shall be deducted and withheld under this section only after a claimant’s weekly benefit rate is reduced based on the pension reduction and earnings offset requirements of section 27, and only after a claimant’s benefit payment is adjusted by amounts withheld from it by the commission to satisfy the legal obligations of restitution under section 62(a), fraud penalties under section 54 and 54a to 54c, child support obligations under section 27, and necessaries under section 30.

    (6) This section also applies to the first time a claimant files a claim in an existing benefit year on or after January 1, 1997.