501(c)(3) non-profit organizations

Non-profit organizations (NPOs) are organizations that meet specific requirements outlined by the IRS to qualify for exemptions. Non-profit organizations have the same responsibilities of paying employees and filing tax returns similar to most other organizations. But there are a few key differences in processing payroll for a non-profit organization.

The most commonly recognized type of NPO is a 501(c)(3) organization, which includes organizations that operate exclusively for charitable, educational, scientific, religious, and other similar purposes.

501(c)(3) organizations are supported on Check, but require special configuration to ensure the correct taxability. This document will walk through the process and considerations needed for setting one of these companies up on Check.

In order to properly set up a 501(c)(3) organization on Check, you need to provide the following information about the company:

The steps below will walk through how to indicate each of these things in Check Onboard and Check Console.

The first step to onboarding a 501(c)(3) organization is to indicate their 501(c)(3) status. This can be done from either Check Onboard or Console.

If you are using Check Onboard to onboard a new company, when you reach the Tax Setup step under Federal taxes, you will be prompted for whether or not your company is a 501(c)(3).

You can also view and/or set this parameter in Check Console under the Company > Taxes tab.

Note: This parameter cannot be changed after you begin running payroll. You will need to reach out to Check Support to change this parameter in the future.

Check then needs to know whether or not the company has elected to become a reimbursable employer for any state unemployment programs. A company being a reimbursable employer means that they will directly reimburse the state for unemployment benefits paid, rather than calculating and withholding unemployment taxes on each pay period like a standard employer.

Currently, Check only allows companies to elect to become a SUI reimbursable employer if they are a 501(c)(3) organization. You will only see the option to elect to become SUI reimbursable after you indicate the company’s 501(c)(3) recognition.

Similar to before, SUI reimbursable elections can be set from either Onboard or Console. In Onboard, this will appear as a question in the Tax Setup step, under each state’s tax section.\

And in Console, this will likewise appear under Company > Taxes, under the tab for each state.

Indicating that a company has 501(c)(3) Recognition will automatically exempt the company from Federal Unemployment Tax (FUTA), as per the IRS 501(c) guidelines. Similarly, electing into SUI Reimbursable will automatically exempt the company from withholding State Unemployment Taxes (SUTAs) and many related surcharge taxes.

However, depending on the type of 501(c)(3) that the company falls under, there may be additional company tax exemptions that need to be created to achieve the correct taxability. In particular, some sub-categories of religious 501(c)(3)s are exempt from a number of taxes by state (e.g., churches), as follows:

If these special case exemptions apply to the company, you will need to reach out to Check Support with the company ID to set the exemptions.

Note: This information is up to date as of December 2024, and may not be comprehensive of all scenarios. Please independently verify what exemptions are applicable for the company, or confirm with a tax professional.

In addition, certain employees for 501(c)(3) organizations may have special tax exemptions that need to be set.

For example, employees of religious NPOs who are members of clergy are exempt from many taxes, as outlined below. Some states allow these employee exemptions to apply to other employee groups as well, such as church caretakers.

You should confirm with the employer if any employees fall under this category, and if they do, similarly reach out to Check Support with the exact employee IDs and taxes that should be exempted.

Note: This information is up to date as of December 2024, and may not be comprehensive of all scenarios. Please independently verify what exemptions are applicable for the company, or confirm with a tax professional.

Finally, clergy members may also have a unique need to record allowance or housing (i.e., parsonage) earnings, which may or may not be taxable, but may need to be reported on the employee’s W-2.

Check supports the following special earning types for these situations:

Note: These earnings types can only be used if the employer is categorized as a 501(c)(3).