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February 2016 • www.CPAPracticeAdvisor.com 27 FICA A l l employee s of nonprof it s a re required to pay Social Security and Med ica re (F IC A) ta xes on t hei r ea r n i ngs of $10 0 or more. Non- profts must w ithhold FICA ta xes and meet the same requirements as for-prof it employers by matching S o c i a l S e c u r i t y a n d M e d i c a r e w ithholdings. Te nonproft must a lso w it h hold federa l income ta x from an employee's wages. Social Security taxes are withheld from an employee's gross wages until his or her annual cumulative wages reach the wage base limit ($118,500 for 2016). However, there is no wage ceiling for Medicare tax. T he cur rent ta x rate for Socia l Securit y is 6.2% for the employer and 6.2% for the employee, or 12.4% total. Te ta x rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total. If an employee's wages in a calendar year a r e m o r e t h a n $ 2 0 0 , 0 0 0 (o r $250,000 for married couples fling jointly), he/she must pay 0.9% more i n M e d ic a r e t a x e s . T he r e i s no employer match for the Additional Medicare Tax. FUTA T he f e de r a l u ne mplo y me nt t a x (FUTA) pays unemployment com- pensation to workers who lose their jobs. FUTA tax should be reported a nd pa id s e pa r a t e l y f rom ot he r payroll taxes. FUTA tax is paid only from an organization's own funds. Employees do not pay this ta x or have it w it h held f rom t hei r pay. Employers report FUTA annually on Form 940. A n organization that is exempt f r om i nc ome t a x u nd e r s e c t ion 501(c)(3) of the Internal Revenue Code is a lso exempt f rom F U TA and, therefore, the f iling of Form 940 is not required. Tis exemption cannot be waived. "A n organization needs to be classifed as a 501(c)(3) to be exempt f rom pay ing FU TA tax," comments Stephen Dombroski, s e n i o r p a y r o l l t a x c o m p l i a n c e m a n a ger at Payc he x , I nc . " T h i s makes it extremely important for the organization to understand exactly what its 501(c) status is, as there are quite a few 501(c) nonproft classif- c at ion s i n t he I nter na l R evenue Code." SUI Rega rd less of whet her subject to FUTA, the nonproft may be liable for state unemployment insurance ta xes (SU I). Because t hese ta xes vary across states, it is important to c h e c k t h e S U I t a x r u l e s i n t h e jurisdiction in which the nonproft employees work. A s a n a lter n at ive, a 5 01(c)(3) organization can fle with the state to leave the SU I system and then reimburse the state dollar-for-dollar for unemployment benefts paid. SUI rates can change based on a v a r iet y of f ac tor s i nc lud i n g t he a mou nt of sa la r ies a nd wages a n employer pays and the number of recent unemployment claims made. But to give you an idea of what to e x pec t i n SU I rates, Su rePay rol l p r o v i d e s t h e c h a r t a t w w w . surepayroll.com/resources/termi - nology/payroll-taxes/sui-tax-rates. Personal Liability " No d i f f e r e nt t h a n a f o r - p r o f i t employer, responsible persons can be held personally liable by the IRS for failure to remit Federal income t a x a nd F IC A t a x w it h hold i ngs, referred to as trust fund taxes," notes N e i l B . B e c o u r t n e y, C PA , Ta x P a r t n e r a t C o h n R e z n i c k L L P. "Responsible persons include cor- porate ofcers, directors and mem- bers of t he boa rd of tr ustees of a nonproft organization." A Year in the Life of a PAYROLL Accountant is sponsored by ADP and SurePayroll The ADP logo and ADP are registered trademarks of ADP, LLC. ADP A more human resource. is a service mark of ADP, LLC. Copyright © 2015 ADP, LLC. Practice made perfect. You want to be more to your clients, and we want to offer you the fexibility you deserve. You can process payroll yourself using our proprietary cloud-based solution, refer clients directly to give your clients access to leading payroll and HR solutions, or even cash out of your existing payroll business to focus on what matters most to your frm. See how ADP ® can provide a more human resource to your frm and your clients: adp.com/cpaprograms. 4 Payroll Considerations for Nonprofts By David N. Plaskow, MBA W hen people receive their paychecks, be it weekly, b i - w e e k l y o r s o m e other, they may notice the litany of deductions indicated on the pay stubs. Tey ofen dis- miss them and simply accept that Uncle Sam takes his fair share—and they grudgingly acquiesce. But what does that alphabet soup (FICA, FUTA, SUI) mean, and is it diferent for employees of nonproft organizations?