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Set up federal and state unemployment insurance for churches and nonprofits

SOLVED•by QuickBooks•69•Updated January 03, 2024

Your 501(c)(3) nonprofit organization or church is exempt from federal unemployment tax (FUTA). Additionally, churches may be exempt from or reimbursable to state unemployment insurance.  If you aren’t sure, contact your state unemployment agency. 

Select your scenario then your product to exempt your business from FUTA or SUI.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Set up FUTA exempt

You’ll need to exempt each of your employees from FUTA. 

  1. Select Payroll, then select Employees.
  2. Select your first employee from your employee list, and then select Edit Employee.
  3. From What are [Employee’s] Withholdings?, select Edit ✎.
  4. From the Tax Exemptions section, select FUTA.
  5. Select Save, and then select Done.
  6. Repeat steps 2–6 for each employee.

Contact us for help exempting your employees from FUTA.

  1. Select Employees.
  2. Double-click your first employee in the list. 
  3. From the Payroll Info tab, select Taxes. 
  4. From the Federal tab, uncheck the FUTA box.  
  5. Select OK. 
  6. Repeat steps 2–7 for each employee.

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Set up SUI exempt

Step 1: Exempt your business from SUI

  1. Select Settings ⚙, and then select Payroll Settings. 
  2. From your [State] tax, select Edit ✎.
  3. Leave the SUI account number blank.
  4. Enter your SUI rate: 0.00%
  5. If applicable, select any tagalong or surcharge rates: 0.00%
  6. Select OK, and then select Done.

Step 2: Exempt your employees from SUI

  1. Select Payroll, then select Employees.
  2. Select your first employee from your employee list, and then select Edit Employee.
  3. From What are [Employee’s] Withholdings?, select Edit ✎.
  4. From the Tax Exemptions section, select SUI and any applicable SUI tagalong or surcharge taxes.
  5. Select Save, and then select Done.
  6. Repeat steps 2–6 for each employee.

Contact us for help exempting your business and employees from SUI.

Step 1: Exempt your business from SUI

  1. Select Lists, then Payroll Item list. 
  2. Double-click your SUI payroll item. You won’t enter an SUI account number. 
  3. Select Continue until you get to the window with your SUI rate. Enter your SUI rate: 0.00%.
  4. Select Continue and then select Finish. 
  5. If applicable, double-click your state tagalong or surcharge payroll item.
  6. Select Continue until you get to the window with your surcharge or tagalong rate. Enter your rate: 0.00%.
  7. Select Continue and then select Finish. 

Step 2: Exempt your employees from SUI

  1. Select Employees.
  2. Double-click your first employee in the list. 
  3. From the Payroll Info tab, select Taxes. 
  4. From the State tab, uncheck the SUI box.  
  5. If your state has an SUI surcharge or tagalong: from the Other tab, select your state's SUI surcharge or tagalong item, then select Delete. 
  6. When finished, select OK twice. 
  7. Repeat steps 2–7 for each employee.

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Set up SUI reimbursable

SUI reimbursable means the state will bill you directly for any SUI if you have a claim. The state will give you an SUI account number. You're required to file an SUI form each quarter to report wages. In QuickBooks, your SUI rate is 0%.

  1. Select Settings ⚙, and then select Payroll Settings. 
  2. From your [State] tax, select Edit ✎.
  3. Enter your SUI account number.
  4. Enter your SUI rate: 0.00%
  5. If applicable, select any tagalong or surcharge rates: 0.00%
  6. Select OK, and then select Done.

You won’t exempt any of your employees from SUI since you’re still required to file an SUI tax form with wages.  

  1. Select Lists, then Payroll Item list. 
  2. Double-click your SUI payroll item.
  3. Select Continue until you get to the window to enter your SUI account number. Enter your account number.
  4. Select Continue until you get to the window with your SUI rate. Enter your SUI rate: 0.00%.
  5. Select Continue and then select Finish. 
  6. If applicable, double-click your state tagalong or surcharge payroll item.
  7. Select Continue until you get to the window to enter your SUI account number. Enter your account number.
  8. Select Continue until you get to the window with your surcharge or tagalong rate. Enter your rate: 0.00%.
  9. Select Continue and then select Finish. 

You won’t exempt any of your employees from SUI since you’re still required to file an SUI tax form with wages.

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