What If the Employer Doesn't Pay Unemployment Taxes?

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Normally, employers pay unemployment taxes. In the event that an employee loses his job through no fault of his own, such as through layoffs or quitting because of an unsafe work environment, the employee may file an unemployment claim and receive benefits covered by these taxes. Sometimes, however, employers accidentally or purposely fail to pay unemployment taxes, which has consequences for both the employer and employees.

Effect on Benefits

  • If your employer fails to pay unemployment taxes and you file an unemployment claim, the unemployment office will have to straighten out the tax issue before it can approve your claim. This may mean your claim will take longer to process, delaying your benefits. In some states, the unemployment office simply will deny your claim. Representatives at your local office can tell you what your state is likely to do given current regulations.

Fines and Jail Time

  • If an employer doesn't pay unemployment taxes, he is in violation of the law. As a result, he may face fines. If the employer cannot pay the fines or if the amount of tax owed is extreme, the employer also may face jail time. The likelihood of jail time increases if an employer tries to hide the failure to pay or otherwise misleads employees, legal counsel and other agents about accounting practices.

Reporting

  • If you know your employer has not paid unemployment taxes properly, you may report the employer under IRS whistleblower regulations. If you are comfortable using your name on the report, you may do this through Form 211. By law, you are entitled to a reward of up to 30 percent of what the IRS collects. If you wish to file a report anonymously, you may do so through Form 3449a. However, if you file anonymously, the reward does not apply.

Need for Assistance

  • If you need unemployment benefits and cannot get them because of the employer's failure to pay unemployment taxes, you might have to turn to other assistance programs. Some of the most utilized government-based programs include Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (food stamps), Housing Choice Voucher Program (Section 8) and the Low-Income Home Energy Assistance Program (LIHEAP). Aid also is available for items such as child care and medical costs. If you need only a small amount of financial help, or if you need assistance not covered by a government program, community nonprofit organizations and churches, a list of which usually is available from the Chamber of Commerce or hospitals, also can help.

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