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For most 501(c)(3) organizations with 10 or more employees, November is the month to exercise their state unemployment tax exemption for an effective date of January 1, 2016.
What does that mean? Well, by federal law, 501(c)(3)s are allowed to opt-out of paying taxes into their state unemployment tax fund, and instead only reimburse the state if and when they have an actual unemployment claim, dollar-for-dollar.
It can be a savings opportunity for many nonprofits who have lower claims than what they pay in state unemployment taxes—which are often driven up by for-profits and other companies that go out of business, as well as state fund deficits and improper payments made in error.
The Unemployment Services Trust (UST) performed more than 325 free unemployment tax savings evaluations for nonprofits with 10 or more employees in 2014, finding a total of $5,437,701 in potential unemployment tax savings if they were to exercise their exemption and join the UST program instead.
But time is running out to benchmark your nonprofit’s unemployment costs and opt out of the state unemployment tax system. Most states have a December 1st opt-out deadline, so UST needs all savings evaluation forms submitted before November 15th at the latest in order to meet the state deadline.
You can view your state’s unemployment tax exemption deadline here: www.chooseust.org/state-unemployment-tax-opt-out-deadlines-for-nonprofits
Unfortunately, if a nonprofit misses the state deadline, they have to wait until the following year to exercise their exemption and join the Unemployment Services Trust. So if you or a nonprofit you know has not exercised their exemption, be sure to share the free savings evaluation before the November 15th deadline: www.chooseust.org/request-a-savings-quote