Non Profit Organizations have unique situations when addressing payroll and payroll taxes for its employees. Here we are dealing here many of the common conditions payroll for Non Profit payrolls
Non Profit Payroll :. Employee Records
There are many state and federal laws and regulations of the staff can be confusing and some times contradictory. What employee records you should keep to be safe? The following points if you actually then (and you should) have to keep in employee personnel files. We recommend for review and IRS purposes that you keep them for at least seven years.
- employee job application
- Reference and background checks
- Offer employment
- Job Description
- IRS Form W4
- State W4 equivalent
- HLS Form I9
- Employee benefit check or declining forms
- annual assessment performance
- Preliminary disciplinary forms
- Exit Interview
Other possible models to keep
Non Profit Payroll:
Non Profit Payroll: Employees
Officers and Directors
The Internal Revenue Code defines the officers of the corporation – president, vice president, secretary, and treasurer – as employees, and your 501 (c) (3) should be classified as such for tax purposes. This applies if the institution paying these officers to perform their duties as officers.
A 501 (c) (3) shall not classify a corporate officer as an employee if he or she fails to services or carry only minor service and neither able nor entitled to benefits
By contrast, , Code defines heads of corporations -. that is, members of the board – as nonemployees and your 501 (c) (3) should be classified as such for tax purposes. This applies if the institution paying the directors to attend board meetings or other adds them for their work as board members.
From time to time, some 501 (c) (3) s may provide volunteer awards or gifts. Generally, if these are non-cash items of nominal value, such as ham around the holidays, the organization should not consider these items as taxable wages.
If a 501 (c) (3) provides a voluntary cash items, such as gift certificates or other taxable fringe benefit, it will include these items in volunteers taxable wages.
If a person is not an officer, director or volunteer and you add them for work and they are not an independent contractor, they are an employee. Like other employers, 501 (c) (3) s to pay salaries to employees must pay federal employment taxes on those earnings. These taxes are:
- Federal income tax
- Fica taxes (Social Security and Medicare)
Non Profit Payroll: Federal Income Tax Withholding
Your 501 (c) (3) general (except Statutory employees) withhold and pay federal income tax from employees’ wages.
To calculate how much federal income tax to keep, employers should ask staff to complete IRS Form W-4, Employee withholding allowance certificate. Ask a new employee to complete and sign the W-4 with his first day of work. Keep the form on file, and send a copy to the IRS if the IRS directs you to do so by written notice.
If a new employee does not provide a completed Form W-4, your 501 (c) (3) shall be made for one position with no withholding allowances
Non Profit Payroll :. Fica Taxes
Fica taxes go to Social Security and Medicare. Your 501 (c) (3) must withhold and pay these taxes on the wages of workers, with one exception: If your organization pays an employee less than $ 100 each calendar year, it does not keep Fica taxes for the employee in question. A 501 (c) (3) shall be paid to both the amount of Fica taxes deducted from employees’ wages and game agency of the amount
Non Profit Payroll :. Federal Unemployment Taxes
The following is a direct quote from the IRS 940 instructions available at the following link:
“Religious, educational, scientific, charitable, and other organizations described in section 501 (c) (3) tax-exempt status under section 501 (a) are not subject Futa taxes and do not need to file Form 940. “
What it comes down to is that if you are a 501 (c) (3) and you have received a favorable determination letter from the IRS you do not have to pay federal unemployment taxes.
Non Profit Payroll:. State Unemployment Taxes
States receive unemployment insurance taxes on non profit, and you should check with the State Unemployment Insurance Your Insurance Department for regulations in the United States, you have employees
Non Profit Payroll: Pay Federal Income and Fica Taxes
Your 501 (c) (3) shall pay the withheld income taxes with both the employer and employee portion Fica taxes (net of advance earned income credit [EIC] payments). These payments shall be paid electronically using the Electronic Federal Tax Payment System (EFTPS) or by send or deliver a check, money order, or cash to an authorized custodian. Note that some taxpayers have to submit exclusivly use EFTPS. Check with a qualified non profit payroll tax professional for more information
Non Profit Payroll :. Reporting Payroll Taxes
When your 501 (c) (3) deposits the Federal income and Fica taxes, it must submit returns reporting that it has withheld and paid to them. Just as 501 (c) (3) of the Federal income tax and Fica, it will notify them together on IRS Form 941Employers Quarterly Federal Tax Return. They must also report annually on IRS Form W2 copy is also distributed to employees
Non Profit Payroll Resolution
There are many similarities Non Profit costs and profit payrolls but several different, not all that have been discussed here. We always recommend that you use a qualified payroll outsourcing company with CPA’s on staff. So questions can be answered professionally and any problems resolved CPA is uniquely qualified by training and experience to work with IRS payroll tax problems.