Have You Exercised Your Unemployment Tax Exemption? $5.4 Million Says You Should Consider It

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 A recent study by the Unemployment Services Trust (UST) found that about 25 percent of all nonprofit employers are unaware of their unique unemployment tax exemption.  But last year, UST also discovered $5.4 million in unrealized unemployment tax savings that hundreds of eligible nonprofits were overpaying to the state.
 
Since 1983, 501(c)(3) nonprofit employers have had the ability to opt out of their state’s tax-rated unemployment system and instead pay dollar-for-dollar for their own unemployment claims through the Unemployment Services Trust, a national nonprofit alternative to state unemployment taxes.
 
After tallying the Savings Evaluations submitted by more than 325 nonprofits last year, UST found $5,437,701 in potential tax savings if the nonprofits exercised their unemployment tax exemption.  For the 2,000 nonprofits that were already members of UST, cash refunds totaled over $11 million.
 
Is your organization eligible? By exercising their federal exemption, nonprofits that work with UST are able to pay only for their own unemployment costs and set aside a reserve account to pay for their claims. Since they are no longer part of the tax-rated pool, they can avoid the claims volatility of other businesses. Plus they receive the support of a dedicated UST claims representative and an HR hotline to help better manage their human resources.
 
But not all nonprofits are overpaying when they pay state unemployment taxes. Those with higher unemployment claims may actually be subsidized through the state unemployment tax fund. So what’s right for you?
 
The first step is to evaluate whether your organization is overpaying for unemployment.  First, ask:
1.      Is your organization a 501(c)(3)?
2.      Do you have 10 or more employees?
3.      Have you had a fairly stable history of unemployment claims?
 
If you answered “Yes” to the above, it’s worth submitting a Savings Evaluation request to the Unemployment Services Trust. They can do a quick analysis of your tax rate compared to your last three years of claims and tell you if you could save by joining UST.
 
The average savings for those who are overpaying for unemployment taxes is $16,000 annually. 
 
As a grantor trust, UST is owned by its participating nonprofits. Investment of assets helps offset the cost of administration – so much so, that on average half of nonprofits participate for free (and last year 76% of members had no cost to participate in UST).
 
“We work tirelessly to ensure that our members get the most out of the UST program, whether we’re helping lower their unemployment insurance costs or alleviating paperwork burdens,” said Donna Groh, Executive Director of UST.
 
To learn more about the Unemployment Services Trust, visit www.ChooseUST.org.

 


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