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What is FUTA and SUTA?
FUTA stands for Federal Unemployment Tax Act and refers to the federal law requiring employers to pay a federal tax on employee wages to help fund unemployment benefits for individuals out of work. SUTA stands for State Unemployment Tax Act, and the SUTA definition refers to the law requiring employers to pay a state tax on employee wages to help fund unemployment benefits for individuals out of work.
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Are nonprofits exempt from FUTA? / Do nonprofits have to pay FUTA?
501(c)(3) nonprofit, governmental, and tribal entities are all exempt from paying Federal Unemployment Taxes (FUTA), and First Nonprofit can help these organizations review their state unemployment tax (SUTA) options. See the question and answer below regarding SUTA exemptions.
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Who is exempt from SUTA? Are nonprofits exempt from SUTA?
Most employers must pay state unemployment taxes (SUTA), and only religious entities that operate exclusively for religious purposes are exempt from SUTA. However, organizations exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code, Native American Indian Tribes, and government entities have a unique savings option for paying SUTA. See the question and answer below.
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Are 501c3s exempt from SUTA?
The following organizations have a unique savings option for paying SUTA:
– Nonprofits: Organizations that are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code
– Native American Indian tribes: Tribes and their wholly owned businesses
– Government entities: Government entities such as federal, state, and local government agencies
These entities can cover their mandatory unemployment costs in one of two ways: paying the state unemployment insurance tax (SUTA) or choosing reimbursement financing (self-insurance). The latter option is a legal right allowing these organizations to opt out of paying SUI taxes and to reimburse their state unemployment agency dollar-for-dollar for unemployment claims paid to former employees.
Though opting out of paying SUTA can save employers money in the short term, a well-thought-out strategic plan should accompany the decision to change unemployment financing and how to pay for future unemployment to limit claim liability. First Nonprofit (FNP) helps nonprofit employers utilize this option with their state unemployment agency, which can save organizations as much as 60% annually! Contact FNP to help determine eligibility for reimbursement financing. Click here to request a free, no-obligation savings evaluation on your organization’s unemployment costs.
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What is SUTA tax rate?
SUTA tax rates vary widely by state and are determined based on several factors, such as industry, and state unemployment insurance fund balance. Each state also sets a wage base, the maximum portion of an employee’s wages subject to SUTA. The wage base varies from state to state. Click here to see your state’s SUTA cost factors.
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What is the SUTA tax rate 2025?
SUTA rates vary widely by state, with many states announcing their 2025 SUTA cost factors in the last months of 2024. Click here for 2024 SUTA cost factors and for 2025 and 2026 updates as they are announced. Nonprofit, governmental, and tribal entities should examine what these changes could mean for their budget.
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What are surety bonds for unemployment? / nonprofit surety bond?
Several states require nonprofits, governmental entities, and tribal organizations employers to post collateral in the form of a surety bond with their state unemployment agency to qualify to reimburse. First Nonprofit provides competitive rates for unemployment surety bonds, but if you choose to participate in one of First Nonprofit’s unemployment programs, we provide these mandated bonds for you at no additional cost. Click here for a list of states that require unemployment surety bonds.
Ready to chat? Get in touch today to request a no-obligation savings evaluation.
We’ve been a member of First Nonprofit’s Unemployment Savings Program since 2011 and highly recommend joining. The program is terrific and allows us to earn interest on our own funds while still meeting the state’s requirements on unemployment payments. In addition, the staff are great and always helpful sorting out any questions we may have. Thank you all!
CCSCT was approached by First NonProfit to discuss its Unemployment Savings Program and ways the program could significantly reduce the amount of unemployment taxes we were paying. At the time, our agency was paying approximately $80,000 per year. First NonProfit conducted an analysis to determine if making the switch would be in our best interest, and it clearly was based on our circumstances. The first year on the program, CCSCT saw a 70% reduction in its unemployment costs and each year, continues to experience further reductions as a result of having minimal claims. Some additional benefits of the program including having a fixed annual cost, an interest-baring reserve account, professional unemployment claims management and representation at all unemployment hearings. This has been one of the best decisions we have made.
We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit. We didn’t have an HR department and needed expertise in the event that an unemployment claim was made. We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process. They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost. We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services. I highly recommend them to every nonprofit I come into contact with!
Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.
Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.
It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.
NYCON members who use First Nonprofit’s programs enjoy enduring savings and improved efficiency. Our association knows that success, because from the beginning, we achieved the same great benefits. Great savings, seamless technology, and responsive service. NYCON highly recommends First Nonprofit’s remarkable unemployment solutions.
Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.