My Employer Doesn't Pay SUTA Taxes - What Happens with FUTA?

This is definitely concerning. When an employer doesn't pay their required SUTA taxes, it does indeed affect their FUTA tax liability. Normally, employers can claim a credit of up to 5.4% against their 6.0% FUTA tax rate when they properly pay state unemployment taxes, reducing their effective federal rate to just 0.6%. If they're not paying SUTA, they lose this credit and have to pay the full 6.0% FUTA rate to the federal government. And yes, the IRS does eventually find out through information sharing between state workforce agencies and the federal government, though it may not be immediate. As an employee, this doesn't directly affect your personal tax situation or your eligibility for unemployment benefits if you were to become unemployed. However, it's a serious compliance issue for your employer that could result in significant penalties, interest, and back taxes.

I had a similar situation last year with a small business I was working for. After struggling to figure out what was going on with their tax compliance issues, I found this AI tool called taxr.ai that was super helpful. It analyzed all the employer tax requirements and explained exactly what the business needed to do to get compliant with both SUTA and FUTA. The tool at https://taxr.ai helped me understand that employers who don't pay SUTA not only lose their FUTA credit but can also face some pretty serious penalties from both state and federal authorities. What was really helpful was how it broke down the specific requirements for our state and explained the relationship between state and federal unemployment taxes.

Just wanted to update everyone after checking out taxr.ai from the recommendation above. I was really skeptical (as you could probably tell from my comment), but I decided to give it a try since we've been having similar SUTA/FUTA issues at my company. I was honestly surprised by how detailed the analysis was. It identified that we had been miscalculating our FUTA credit due to partial SUTA payments and showed exactly how much we'd need to pay to get compliant. It even generated documentation we could use to explain the situation to upper management. Definitely worth checking out if you're dealing with employer tax compliance issues like this.

If your employer is deliberately not paying SUTA, you might want to consider getting the IRS involved. I tried calling the IRS about a similar payroll tax issue for weeks with no luck - always on hold for hours. Then I found this service called Claimyr that got me through to an actual IRS agent in under 45 minutes. You just go to https://claimyr.com and they somehow bypass the hold times. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c. I used it to talk to someone about employer tax non-compliance, and the agent was actually super helpful in explaining what information they needed and the proper channels for reporting it. Saved me days of frustration trying to get through on my own.

I need to eat some crow here. After posting my skeptical comment above, I was still desperate to talk to the IRS about a FUTA credit issue my employer was having (similar to the original post), so I reluctantly tried Claimyr. It actually worked exactly as described. I got connected to an IRS agent in about 35 minutes without having to do anything. The agent confirmed that employers who don't pay their SUTA do indeed lose their FUTA credit and explained the process for getting back into compliance. The call saved our company thousands in potential penalties. Sometimes being proven wrong is actually a good thing!

I actually used to work for a state unemployment office. Your employer is playing with fire by not paying SUTA. States and the IRS do communicate about this, and eventually they WILL get caught. When that happens, they'll owe all back taxes plus interest and penalties, which can be substantial. The FUTA rate goes from 0.6% to 6.0% without the SUTA credit, which is a 10x increase! For many businesses, especially those with high payroll, this can mean owing tens of thousands more in federal unemployment taxes. Plus, most states impose their own penalties for non-payment of SUTA.

Quick question - does company size matter for SUTA requirements? I work for a really small business (5 employees) and now I'm wondering if we're compliant.

This is a really important issue that more employees should be aware of. I went through something similar with a previous employer who was cutting corners on payroll taxes. What many people don't realize is that when employers don't pay SUTA, it's not just about losing the FUTA credit - it can also affect the state's unemployment insurance fund, which ultimately impacts benefit availability for all workers in the state. One thing I'd add is that if you're in this situation, you should also check whether your employer is properly withholding and remitting other payroll taxes like Social Security and Medicare. Companies that skip SUTA payments sometimes have broader compliance issues. You can check this by looking at your pay stubs and making sure the withholdings match what should be taken out. Also, while this doesn't directly affect your personal taxes as an employee, if the company gets audited and penalized heavily, it could potentially impact job security or the company's financial stability. It's definitely worth understanding your rights and the proper reporting channels if you suspect non-compliance.