Complying with state and federal law is critical for non-profit organizations, who need every source of funding to continue their mission in their community and world. Understanding the nuances surrounding NPO payroll tax obligations can help ensure you’re following the rules and regulations that apply to the non-profit organization you serve.
Let’s break it down.
Do non-profit organizations pay payroll taxes?
Yes, non-profit organizations pay almost all of the same payroll taxes as organizations that don’t have exemptions. As a non-profit organization:
- you must withhold federal income tax from your employees’ checks according to the current year’s federal income tax brackets and tax rates
- you must withhold Social Security tax from your employees’ checks at the current rate (6.2% in 2022) and contribute the same amount in the form of an employer contribution, totaling 12.4% of the employee’s pay
- you must withhold Medicare tax from your employees’ checks at the current rate (1.45% in 2022) and contribute the same amount in the form of an employee contribution, totaling 2.9% of the employee’s pay
- you must withhold state and local (county or city) income tax from your employees’ checks according to the current year’s state and local income tax breaks and tax rates
- you must pay state unemployment tax
While for-profit organizations must also pay Federal Unemployment Tax Act taxes on their employees, non-profit organizations are exempt from this requirement and are not required to pay.
How often do I have to make a deposit?
Non-profit organizations must deposit the federal income tax they withheld, Social Security tax they withheld, Social Security tax they match, Medicare tax they withheld, and Medicare tax they matched either monthly or semi-weekly. How often you’re required to make those deposits depends on specific criteria that you can find in IRS Publication 15.
State payroll tax, local income tax, and state unemployment tax due dates vary by state but are typically due quarterly.
Federal unemployment tax is a little more complicated; deposits must be made when the tax due exceeds $500.
Payroll tax solutions for non-profit organizations
Small businesses and non-profit organizations often have this struggle in common: payroll taxes are complicated but their budget doesn’t support hiring an HR director or a payroll specialist or outsourcing payroll altogether.
If your non-profit organization is looking to take the stress out of nonprofit payroll, improve compliance with state and federal law, and give your employees direct access to their pay stubs and personal information, ASAP payroll checks every box. With ASAP payroll, taxes are automatically calculated based on the most current tax tables and manage complicated deadlines for both deposits and tax filings. ASAP payroll also offers employee self-service, which means employees can log in to view and print their paystubs, update their W-4 or change their address, and more.
To take the first step toward easier payroll for your non-profit organization, request a quote from ASAP payroll today. We can’t wait to help you find affordable solutions that help you focus on what you do best: make a difference in your community.
