Saving on Unemployment Taxes

In the spirit of tax season, I am reminding you to always pay your state unemployment taxes.

As background, businesses withhold from employees' paychecks certain amounts for FICA (social security and medicare) as well as the employees' state and federal withholding. Employers also pay unemployment taxes on both the state and federal levels. Here in Georgia, the state agency that ensures compliance as well as pays unemployment benefits to employees is the Georgia Department of Labor. Like many state agencies, the Georgia DOL is hurting financially under the burden of the unemployment rate and paying benefits.

The states have teamed with the IRS to give you a pretty good incentive to pay your state unemployment taxes: if you don't, your federal unemployment tax rate will skyrocket. This is also no idle threat. The state unemployment agencies typically have very good relationships with the IRS and will communicate to them your lack of payment. Even in good times, the Georgia DOL has been very proactive in making sure Georgia employers pay their share of the unemployment burden. With the economy remaining in pretty bad shape, they have only increased their collection activities.