IRS Publication 15A — Employer's Supplemental Tax Guide

organization is subject to FUTA tax when paying wages to employees on behalf of a non -section 501(c)(3) organization (for example, a section 501(c)(3) organization paying wages to employees of a related non-section 501(c)(3) organization, a section 501(c)(3) organization that is a section 3504 agent paying wages on behalf of a non -section 501(c)(3) organization, a section 501(c)(3) organization that is a common paymaster paying wages on behalf of a non-section 501(c)(3) organization, etc.). Tip: An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. Other than section 501(c)(3) organizations. Nonprofit organizations that aren’t section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. However, these organizations aren’t exempt from withholding federal income, social security, or Medicare tax from their employees’ pay, or from paying FUTA tax. Two special rules for social security, Medicare, and FUTA taxes apply.

1. If an employee is paid less than $100 during a calendar year, their wages aren’t subject to social security and Medicare taxes.

2. If an employee is paid less than $50 in a calendar quarter, their wages aren’t subject to FUTA tax for the quarter.

The above rules don’t apply to employees who work for pension plans and other similar organizations described in section 401(a).

Excise tax on excess executive compensation. Certain tax-exempt organizations may be subject to an excise tax on excess executive compensation. For more information, see the Instructions for Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.