The IRS provides resources for tax-exempt organizations that compensate workers.
If a tax-exempt organization (EO) has employees, the EO is responsible for Federal Income Tax Withholding and Social Security and Medicare taxes. In addition, some EOs are responsible for Federal Unemployment Tax.
Independent Contractors vs. Employees
Are the workers for a tax-exempt organization independent contractors or employees? Before the EO can know how to treat payments it makes for services, the EO must first know the business relationship that exists between the organization and the person performing the services.
Electronic Filing and Payment Options for Employment Tax Returns
Electronic filing and payment options are available to exempt organizations for the employment tax and information returns required if they pay workers.
An EO generally must deposit employment taxes and certain excise taxes before it files its return. If the EO does not make the deposits electronically, it should deliver deposits with completed deposit coupons to an authorized financial institution or a Federal Reserve Bank serving the EO’s area.
The basic requirements for tax and wage reporting compliance, including determining if an EIN is necessary, calculating withholding, making deposits, and keeping tax and reporting records.
Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
The Trust Fund Recovery Penalty (TFRP) may be assessed against any person, including a an officer, director, employee or a member of a board of trustees of a tax-exempt organization, who is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and willfully fails to collect or pay them.
A listing of the common employment tax forms that a tax-exempt organization would need.
Two key publications on employment tax issues are Publication 15, Circular E, Employer’s Tax Guide, and Publication 15-A, Employer’s Supplemental Tax Guide. This section provides a listing of, and links to, these and other common employment tax publications that a tax-exempt organization would need.
A listing of IRS notices on employment tax issues that may be of interest to tax-exempt organizations.
Employment Tax Resources for Exempt Organizations
Additional resources on employment tax issues for tax-exempt organizations can be found at IRS.gov.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.
