Who Owes

• If you have employees, you must pay unemployment tax for them. It doesn't matter if the employees are full-time, part-time or temporary workers. The law allows for a few exceptions, including farm workers, household domestic workers, and employees of a small, non-profit preschool. If you're in doubt about whether or not you owe unemployment taxes, check with your state's unemployment office. If you're self-employed or the owner of a business you don't pay unemployment taxes for yourself; you're also not eligible to collect unemployment benefits.
  
  

How Much to Pay

• Each state assigns a tax rate to employers in the state. You'll be assessed a percentage of each employee's wages. Your tax rate will be based on your history --- that is, how many of your former employees have collected unemployment, as well as the industry in which you operate. Some fields experience more unemployment than others, so businesses in those fields payer a higher rate. You may pay a higher or lower rate each year, depending on the rate your state assigns to you. In addition, you will pay a federal unemployment insurance tax. You must pay the tax on all wages, as well as vacation, holiday and sick pay and severance pay.
  
  

Paying Your Taxes

• You must pay your unemployment taxes quarterly. You'll need to file a report with your state, showing all your employees, their Social Security numbers, the hours they worked, their hourly rate and any other payments made to them. Many states allow you to submit this report, as well as your payment, electronically. If you use a payroll service they may file these reports for you, but you should verify that they do so since you are ultimately responsible for making these payments.
  
  

Penalties

• If you fail to pay your unemployment taxes it will cost you. States assess late fees if you don't make payments on time, and assess interest for every day the payment is late. These penalties and interest charges continue to grow and accrue. You could end up owing substantial amounts of money. For instance, in New Hampshire you'll incur a $25 late fee and 1 percent interest each month you don't make a payment. Washington State adds additional penalties on top of interest for every month a payment is overdue.