Question Submit

Wednesday, April 28, 2010

Federal Unemployment Problem - 501(c)3 Not-for-Profit

I am the volunteer treasurer for a non-profit (501(c)3) pre-school. I'm using QuickBooks 2008 with payroll.
Everything was going just fine until the other day when an inactive employee was causing a Federal 940 payment to appear in my payroll liabilities. Being non-profit, we aren't subject to this tax and it isn't calculating the tax for the other two active employees. 

I went into the Employee Center to edit the inactive employee to ensure the Federal Unemployment Ins. Tax was not checked and it wasn't. I even reactivated the employee and edited the tax info again. Both ways have the check box empty, but the tax keeps showing up. I went into Payroll setup to "uncheck" the Federal 940 as a liability, but there doesn't seem to be a way to turn it off.

Any suggestions to help resolve this are greatly appreciated!!!

Thank you.

There are two ways to change the Federal Unemployment (or really any payroll liability), at the employee level and at the company level. 

It sounds like you have already made sure that the tax is not applied at the employee level, but for everyone else:

To change the way payroll liabilities apply to your employees, open the Employee Center, and on the Employee tab right click on the employee you want to modify and select Edit Employee. Choose "Payroll and Compensation Info" from the drop down list and click the "Taxes" button. Here you can select the taxes that the employee is subject to. (The screen shot is from a sample file in Quickbooks so the employee "Duncan Fisher" IS subject to FUI, and the box IS checked.)

What about payroll taxes at the company level. These have to be modified one at a time, so lets look at Federal Unemployment as an example:

Click on lists and select "Payroll Item List" right-click on Federal Unemployment and select "Edit Payroll Item". You will notice that there is a box that allows you to make it "inactive". If you were starting fresh and are not subject to the tax I would probably select that box to keep anything from using that payroll item.

However you have already had things pop up, so select "Next" on the above screen three times and you will get a screen labeled "Taxable compensation". It is here that you select what classes of income would be subject to the tax. If I had to guess (which is precisely what I am doing) you have this liability for one employee and not the rest because that employee has a class of income (ie. vacation pay, sick pay, etc.) that the other employees do not, and that class of income is checked to be taxable for Federal Unemployment in QuickBooks.

Hope that is your problem. I hate it when things mysteriously happen, and then you have to search for hours for one nuance in the set-up that is causing the problem. 

One suggestion I have to those thinking about using QuickBooks, or just bought it and feel hopelessly lost, is to consider having a professional set up your file to start with. It is not all that expensive, and you may find it saves money in the long run.

No comments: