Labor Law Center Blog » Blog Archive » Colorado Goes After Unemployment Fraud

Colorado Goes After Unemployment Fraud

January 3rd, 2007 Posted by Mark

We just done spending a lot of time talking about unemployment systems in Colorado and every other system in the United States, so why do we need to go back and talk more about them? Well, because some employers in the state of Colorado and elsewhere are making noise by cheating the system. An employer practice called State Unemployment Tax Act dumping, or SUTA dumping, is becoming increasingly prevalent across the United States.

The practice is so common that the Colorado Department of Labor and Employment and its Unemployment Insurance program claim to have tracked certain tax advising companies that actually promote this idea with their clients and spread the belief that it is a way of saving money from the government’s reach. Of course, according to government sources, these tax advisory companies are only in it for their own gain, and don’t care that it is illegal and tapping the unemployment system of much needed money.

The Colorado Department of Labor and Employment, however, is sending out stern warnings to any employer who might be doing this practice, or even just thinking about doing it. (None of my loyal readers are up to this business, of course!) The state says that any employers caught red-handed cheating the government of unemployment insurance taxes will be put up to criminal and civil prosecution, which could lead to jail time and stiff fines.

That includes having to pay any owed back taxes that are due to the government, with late fees and interest rates assessed on top of them.

So called SUTA dumping occurs when an employer creates a new business in essence and moves employees on paper to this entity in order to avoid having to pay higher unemployment insurance taxes at their original, and real, company. This usually involves having to lie on state forms about this new company, about its purpose for existence, and about the supposed jobs that these employees will be doing at this new company.