Accounting Articles > Non-Filers:

Unemployment taxes

So you’ve been in business for a while, you’ve withheld payroll taxes, and you haven’t filed or paid your Illinois Department of Employment Security taxes, better known as unemployment. What do you do?

In the case of Unemployment taxes, unlike other payroll taxes, this depends on whether or not you plan to stay in business, or to file bankruptcy. Illinois unemployment taxes are strictly a corporate obligation. There is no personal obligation if you are a corporation. They can be discharged in a bankruptcy.

If you plan on staying in business, you had better find a competent accountant to do the back work and file them. If you do not file the returns, the Department of Employment security will complete one for you and send you a bill which includes interest and penalty. Generally, the department's returns are based on high estimates, which means that the tax itself will be higher than it should, to say nothing of the interest and penalty which will be tacked on top. In other words, it's in your best interest to have someone competent prepare your returns, rather than leaving the Department to guess at them.

What happens if you don't pay them? This is where it really gets weird. The taxes will be referred to a collection agency. The Department no longer collects its long term debts. A collection agent will call you for the amount that is due. The amount will be wrong because the Department estimated your taxes for you. The collection agent won't care. Collection agents only want to collect money so that they can get a commission, and they can't do anything about your tax status even if they want to, because they aren't agents of The Illinois Department of Revenue. Getting the matter moved back to the Department, where you can get something done, can be difficult. The collection agency doesn't want to lose its commission, so it will do what it can to prevent the case from returning to the Department.

Unemployment taxes are generally quite small in the first place. Depending on the percentage, you're generally talking about $100 to $500 per worker per year. Get them filed and paid if your planning on staying in business. If not, a bankruptcy will discharge them.