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UNEMPLOYMENT COMPENSATION
Unemployment compensation is a state program that gives weekly cash to people who are unemployed. Public charities and nonprofits do not pay federal unemployment (FUTA) tax, but states vary with regards to state unemployment taxes (SUTA). To find out if a particular state requires churches to pay SUTA, contact that state per the links found on the State Employment Office Quick Reference Guide, or call the specific state’s unemployment office.
An organization that is exempt from income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA. This exemption cannot be waived. An organization that is not a section 501(c)(3) organization is not exempt from paying FUTA tax. Report FUTA taxes on Form 940, Employer's Annual Federal Unemployment Tax Return.
MCC Resource for Treasurers of Our Local Churches US Edition