Non-profit payroll has the same federal mechanics as any business, plus a layer of grant accounting and 990 considerations most providers miss.
Restricted vs. unrestricted funds
Every grant comes with strings. Salaries charged to a restricted grant need to be allocated to that fund in your GL, not lumped into general operations.
The cleanest setup: tag each payroll with the funding source up front. Our GL export does that automatically. No spreadsheet reconciliation at quarter-end.
SUI exemption
501(c)(3) organizations can elect to be reimbursable employers for state unemployment, paying actual claims instead of UI tax. This makes sense if your turnover is low; it backfires if a single termination triggers years of claims.
We model both options for new clients and re-check annually.
Clergy housing allowance
Ministers can receive a portion of compensation designated as housing allowance, exempt from federal income tax (but not SECA). The designation has to be in writing before the compensation is paid. Retroactive designations don’t fly.
Volunteer reimbursements
Reimbursements aren’t compensation if they’re under an accountable plan: business purpose, documentation within 60 days, return of excess advances. Otherwise they’re taxable.
What goes on the 990
Compensation reporting on Schedule J trips up almost every non-profit at some point: bonuses, deferred comp, fringe benefits. We coordinate with your CPA so the 990 figures match the W-2s without manual reconciliation.
We work with non-profits weekly. If you’re new to fund-aware payroll, we’ll set up your chart of accounts mapping in the first week.
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