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.
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.
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.
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.
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.
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.
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.
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First Nonprofit has been a great partner. They have helped us saved hundreds of thousands of dollars! They have awesome resources for our nonprofit organization. Thanks for the partnership.
First Nonprofit has saved us so much money over the state’s program. We had one little glitch with the state recently and we contacted FNP immediately. FNP staff called us back immediately and moved to remedy the problem.
Luckily for us, our interactions regarding any issues with staffing has been very minimal! I can say that all other interactions with regards to billing, 941 reporting, etc. have been extremely pleasant, accommodating and easy to work with. Kim Ghanayem is always prompt, professional and friendly. Thank you so much!
First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.
I have worked with the First Non-Profit Team for many years, and I appreciate the quick response and care that Cecilia and the team provides anytime I have questions. While there are other providers that may provide like services, First Nonprofit will always be my first choice! I appreciate you!
I would like to comment on my experience with FNP….to date our District has saved $1,000’s of dollars by being enrolled in the First Nonprofit program. My only regret is that we did not know about this method of paying unemployment tax years ago….as I had figured about five years
ago, had we enrolled 15-20 years ago, we could have saved our small school district upwards of $500,000 in payments to IDES. Also we would have had a pretty hefty sum of money in our Reserve Account. Thankfully I attended a workshop hosted by First Nonprofit back in 2015 which got the ball rolling!
My experience with the FNP has been fantastic. The idea of setting funds aside for the unemployment tax liability is a bedrock for nonprofit organizations like mine, namely ASHBA; what is even more advantageous is having the FNP as a custodian of those funds. 100% recommended!
First Nonprofit smoothed the unemployment perils for our organization during Covid. Without the ability to cap our UI exposure, we would not have been able to weather the storm. The program worked perfectly and we have come out of the pandemic ready to forge on. Thanks FNP!