UNEMPLOYMENT INSURANCE - WHAT HAPPENS IF EMPLOYER DOES NOT PAY TAXES

And here is an article on the issue from ehow.com which also mentions a federal tax benefit to Employer's who file timely their Unemployment Insurance Taxes:

"Unemployment Insurance Tax Laws in the State of New York
By Rhonda Campbell, eHow Contributing Writer

New York UnemploymentReuters reported that as of March 2010, New York State's unemployment rate was at 8.6 percent, down from the previous month's 8.8 percent unemployment rate. Employer unemployment insurance contributions help to fund temporary monies available to displaced workers. New York's Department of Labor provides oversight for the state's unemployment insurance laws. Understanding the laws can help employers and employees to get the aid that they need during times of economic downturn and work shortages.

Employers Required to Pay Unemployment Insurance

Employers who pay at least one employee $300 or more in a calendar quarter are required to pay unemployment insurance tax. Employers who hire domestic workers must pay the insurance if the domestic worker earns $500 or more in one or more calendar quarters. The insurance is not allowed to be deducted from employee wages. Employers who formerly paid unemployment insurance but who have not paid or employed a worker for four calendar quarters do not have to continue to pay the insurance. Employers are required to register with the Department of Labor to make their quarterly unemployment insurance payments, which are based upon the number of employees the employer hires and the gross wages for hired employees.

State Unemployment Tax Dumping

State unemployment tax dumping, or the attempt to transfer 10 percent or more of an employer's employees onto another employer in order to reduce unemployment insurance payments, is prohibited. Penalties for unemployment insurance tax dumping include a fine equal to 10 percent of the employer's taxable wages in the previous payroll year or a fine of $10,000, whichever sum is greater.

Lowered Federal Tax through State Unemployment Taxes

Employers can receive a 5.4 percent credit against their federal unemployment insurance tax if they submit their New York State unemployment insurance payments on time. Should an employer be late or negligent in paying their state unemployment insurance payments, they will be liable for the full 6.2 percent of their Federal Unemployment Tax Act (FUTA) tax. They must also still pay the state tax.

Penalties

Willful negligence to pay unemployment insurance tax is deemed to be a misdemeanor in New York State. Employers who refuse to allow Department of Labor commissioners to review their records will also be cited with a misdemeanor. It is also unlawful for employees or staff members at the Department of Labor to receive money for assistance that they give to employers or displaced workers regarding unemployment insurance.

References
•New York Department of Labor
•Reuters - New York Unemployment Rate"