labor lawAdivision of labor law center

The Colorado Department of Labor mailed 1099-G statements to anyone who received unemployment benefits in 2006, during the month of January. A representative of the Department says, “Unemployment benefits are taxable, and those who receive benefits will need these statements to prepare their 2006 state and federal tax returns.”

The statements were mailed in January and should have been received no later than February 15, 2007. If you were unemployed in 2006, collected unemployment benefits, and did not receive a 1099-G statement, you should contact the Colorado Department of Labor. 

Failure to claim Colorado unemployment benefits could get you into a lot of trouble with the Internal Revenue Service. The Department of Labor is required to submit reports of unemployment earnings to the IRS and the Colorado Department of Treasury. By submitting these reports, both the federal and state governments are aware of income received by unemployed workers. 

When you prepare your tax return, you will need to refer to your 1099-G for your income and any withholdings. If you chose to have the state and/or federal government withhold taxes prior to issuing your benefits, the 1099-G will report these amounts. 

In some instances, the amount of earnings reported on the 1099-G (minus tax withholdings) will be higher than the amount you actually received. If this is the case, and you are unsure why the amounts are different, you may contact the IRS to ask for an explanation. They can also give you instructions on how to report your earnings on your tax forms. 

Before you contact the IRS because of a discrepancy in the earnings, take a moment to think about possible explanations. Were there court-imposed sanctions on your earnings? Do you pay alimony or child-support? Are these payments attached to your wages? Were you required to pay back a portion of previous earnings or bonuses you received prior to your unemployment? These could explain the difference between the amount you actually received for unemployment and the earnings reported on the 1099-G. 

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.

The influence of migrant workers in Colorado’s agriculture is reflected in Colorado Unemployment Insurance posters. An employer of agricultural labor is one who pays either cash wages of $20,000 or more to one or more workers in any one calendar quarter, or employs ten workers for 20 weeks during the calendar year. Colorado Unemployment Insurance posters make special note that any person who is a member of a crew furnished by a crew leader to perform farm labor for any other person shall be treated as an employee of the crew leader.

Even though exempt from federal unemployment taxes under FUTA, Section 3306 (c)(8), employer’s can be required to pay unemployment taxes. Religious, educational, or charitable nonprofit organization described in the Federal Internal Revenue Code Section 501 (c)(3) and has four or more employees for 20 weeks during the calendar year must participate in the program.

Other employers required to participate in the program are listed on Colorado Unemployment Insurance posters. An employer is required to pay unemployment insurance tax if he or she employs and pays one worker. This does not apply to an employer who employs agricultural labor or domestic workers, or to an employer that is a nonprofit 501 (c)(3) organization.

Insurance tax is also paid if an employer voluntarily elects to participate in the Unemployment Insurance (UI) Program, acquires all of the Colorado trade, business, organization, or acquires a substantial portion of the assets from a predecessor employer, acquires part of the organization, trade, or business of an employer which, if considered separately, would be an employer as defined in the law, is an employing unit which is subject to the Federal Unemployment Tax Act (FUTA), is a state agency, state-operated hospital or school of higher education, or a political subdivision of the state, or employs domestic help in a private home and pays cash wages of $1,000 or more to one or more workers in any calendar quarter. This provision also applies to local college clubs and/or local chapters of a college fraternity or sorority.

The Colorado Unemployment Insurance posters are currently available with the most up to date information.