Nonprofit Unemployment Basics

Posted on Wednesday, September 14, 2011

• Like other employers Indiana nonprofits are subject to state unemployment tax; however, 501(c)(3) organizations are exempt from federal unemployment tax.

• The Indiana Department of Workforce Development requires nonprofit organizations employing 4 or more individuals for some portion of a day in each of 20 different weeks during the calendar year to pay Indiana unemployment tax. There is no minimum dollar amount required.

• Employees working for a nonprofit that has less than 4 employees are not entitled to collect unemployment.

• Once an organization becomes a qualified employer, it will continue to be required to pay unemployment. The organization may be able to discontinue paying unemployment if the number of employees drops below 4 by writing a letter to the Department of Workforce Development stating this fact.

• Nonprofits may choose to be a reimbursable employer. Instead of making regular premium payments, the organization reimburses the fund for benefits paid to former employees. To become a reimbursable employer, the nonprofit must provide a copy of its IRS 501(c)(3) exemption letter and complete DWD Form 1065, Election to Pay. Once a nonprofit becomes a reimbursable employer, the status remains in effect for 2 full calendar years.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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