Nonprofit Payroll
Website design By BotEap.comNonprofit organizations have some unique situations when dealing with their employees’ payroll and payroll taxes. Here we are addressing many of the common payroll situations for nonprofit payrolls.
Website design By BotEap.comNonprofit Payroll – Employee Records
Website design By BotEap.comThere are many state and federal laws and regulations related to employee records that can be confusing and sometimes contradictory. What employee records should you keep to be safe? The following items, if you really have them (and should) should be kept in the employee’s personnel files. We recommend for auditing and IRS purposes that you keep them for at least seven full years.
Copies of any statement provided by employees regarding nonresident alien status, residence in Puerto Rico or the Virgin Islands, or residence or physical presence in a foreign country
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Any agreement between you and the employee on Form W-4 for the voluntary withholding of additional amounts of tax
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Employee requests to have tax calculated based on their individual accrued wages withheld and any notification that such request was revoked
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IRS Form W-5, Certificate of Advance Payment of the Earned Income Credit, and the amounts and dates of the advance payments
Website design By BotEap.comNonprofit Payroll – Payroll Payment Records
The name, address, and Social Security number of each employee
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The total amount and date of each wage payment and the period of time the payment covers
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The amounts subject to withholding for each salary payment
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The amount of withholding tax collected in each payment and the date of collection
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The reason, if the tax base is less than the total payment
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The fair market value and date of each payment of non-monetary compensation
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Information about the amount of each payment for accident or health plans
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The dates in each calendar quarter that any employee worked for you, but not in the course of your trade or business, and the amount paid for that work, if necessary to calculate the tax liability.
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Copies of statements employees give you when reporting tips received at work, unless the information shown on the statements is elsewhere on this list.
Website design By BotEap.comNonprofit Payroll: Employees
Website design By BotEap.comOfficers and Directors
Website design By BotEap.comThe Internal Revenue Code defines a corporation’s officers (president, vice president, secretary, and treasurer) as employees, and your 501(c)(3) must classify them as such for tax purposes. This applies if your organization pays these officers to perform their duties as officers.
Website design By BotEap.comA 501(c)(3) should not classify a corporate officer as an employee if they perform no or only minor services and do not receive or are entitled to compensation.
Website design By BotEap.comRather, the Code defines a corporation’s directors, meaning members of the board of directors, as non-employees, and your 501(c)(3) must classify them as such for tax purposes. This applies if your organization pays board members to attend board meetings or otherwise compensates them for performing their duties as directors.
Website design By BotEap.comvolunteers
Website design By BotEap.comFrom time to time, some 501(c)(3)s may provide prizes or gifts to volunteers. In general, if it involves non-cash items of nominal value, such as a ham during the holidays, your organization should not count these items as taxable wages.
Website design By BotEap.comIf your 501(c)(3) gives volunteers cash items, such as gift certificates or any other taxable fringe benefits, you must include these items in the volunteers’ taxable wages.
Website design By BotEap.comEmployees
Website design By BotEap.comIf a person is not an officer, director, or volunteer and you compensate them for work performed and they are not an independent contractor, they are an employee. Like other employers, 501(c)(3)s that pay wages to employees must pay federal employment taxes on those wages. These taxes include:
http://www.irs.gov/instructions/i940/ch01.html#d0e251 Website design By BotEap.com“Religious, educational, scientific, charitable and other organizations described in section 501(c)(3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file the Form 940.” Website design By BotEap.comIt all boils down to if you are a 501(c)(3) and have received your favorable determination letter from the IRS, you do not have to pay federal unemployment taxes. Website design By BotEap.comNonprofit Payroll: State Unemployment Taxes Website design By BotEap.comStates vary on unemployment taxes on nonprofits, and you should check with your state Department of Unemployment Insurance for the rules in the states where you have employees. Website design By BotEap.comNonprofit Payroll – Paying Federal Income Taxes and FICA Website design By BotEap.comYour 501(c)(3) must pay the income taxes withheld, along with the employer and employee portions of the FICA taxes (minus any advanced earned income credit). [EIC] Payments). These payments must be made electronically using the Electronic Federal Tax Payment System (EFTPS) or by mailing or delivering a check, money order, or cash to an authorized depository. Please note that some taxpayers are required to deposit exclusively using EFTPS. Consult with a qualified nonprofit payroll tax professional for additional information. Website design By BotEap.comNonprofit Payroll – Payroll Tax Filing Website design By BotEap.comOnce your 501(c)(3) deposits federal income taxes and FICA, you must file returns stating that you have withheld and paid them. Just as the 501(c)(3) pays federal income taxes and FICA together, you must report them together on IRS Form 941, Quarterly Federal Income Tax Return for Employers. They must also be reported annually on IRS Form W2, a copy of which is also distributed to your employees. Website design By BotEap.comPayroll Without Benefit: Conclusion Website design By BotEap.comThere are many similarities between nonprofit payroll and for-profit payroll, but there are several differences that have not all been discussed here. We always recommend that you use a qualified payroll outsourcing company with a CPA on staff. That way, your questions can be professionally answered and any issues resolved by a CPA who is eminently qualified by training and experience to work with the IRS on payroll tax issues.
- employee job application
- Background checks and references
- Job offer
- Work description
- IRS Form W4
- Equivalent W4 status
- HLS Form I9
- Employee Benefits Enrollment or Denial Forms
- Annual performance reviews
- Intermediate evaluations or disciplinary forms
- exit interview
- Federal taxes
- FICA taxes (Social Security and Medicare)
http://www.irs.gov/instructions/i940/ch01.html#d0e251 Website design By BotEap.com“Religious, educational, scientific, charitable and other organizations described in section 501(c)(3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file the Form 940.” Website design By BotEap.comIt all boils down to if you are a 501(c)(3) and have received your favorable determination letter from the IRS, you do not have to pay federal unemployment taxes. Website design By BotEap.comNonprofit Payroll: State Unemployment Taxes Website design By BotEap.comStates vary on unemployment taxes on nonprofits, and you should check with your state Department of Unemployment Insurance for the rules in the states where you have employees. Website design By BotEap.comNonprofit Payroll – Paying Federal Income Taxes and FICA Website design By BotEap.comYour 501(c)(3) must pay the income taxes withheld, along with the employer and employee portions of the FICA taxes (minus any advanced earned income credit). [EIC] Payments). These payments must be made electronically using the Electronic Federal Tax Payment System (EFTPS) or by mailing or delivering a check, money order, or cash to an authorized depository. Please note that some taxpayers are required to deposit exclusively using EFTPS. Consult with a qualified nonprofit payroll tax professional for additional information. Website design By BotEap.comNonprofit Payroll – Payroll Tax Filing Website design By BotEap.comOnce your 501(c)(3) deposits federal income taxes and FICA, you must file returns stating that you have withheld and paid them. Just as the 501(c)(3) pays federal income taxes and FICA together, you must report them together on IRS Form 941, Quarterly Federal Income Tax Return for Employers. They must also be reported annually on IRS Form W2, a copy of which is also distributed to your employees. Website design By BotEap.comPayroll Without Benefit: Conclusion Website design By BotEap.comThere are many similarities between nonprofit payroll and for-profit payroll, but there are several differences that have not all been discussed here. We always recommend that you use a qualified payroll outsourcing company with a CPA on staff. That way, your questions can be professionally answered and any issues resolved by a CPA who is eminently qualified by training and experience to work with the IRS on payroll tax issues.