skip navigation
Search Help
Navigation Help

Tax Map Index
ABCDEFGHI
JKLMNOPQR
STUVWXYZ#

International
Tax Topic Index

Affordable Care Act
Tax Topic Index

Exempt Organization
Tax Topic Index

FAQs
Forms
Publications
Tax Topics
Worksheets

Comments
About Tax Map

IRS.gov Website
Publication 557
taxmap/pubs/p557-007.htm#en_us_publink1000199907

Employment Tax Returns(p12)

rule
Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements, or if the taxes clearly don't apply.
For more information, obtain a copy of Publication 15, which summarizes the responsibilities of an employer, Publication 15-A, Publication 15-B, and Form 941.
taxmap/pubs/p557-007.htm#en_us_publink1000257505

Small Business Health Care Tax Credit.(p12)

rule
If your small tax-exempt organization provides health care coverage for your workers you may qualify for the small business health care tax credit. Go to IRS.gov and select Affordable Care Act Tax Provisions for more details. See also Small Business Health Care Tax Credit.
taxmap/pubs/p557-007.htm#en_us_publink100027646

New guidance provides transition relief for employee health insurance expenses.(p12)

rule
Notice 2014-06 provides guidance on section 45R for certain small employers that can't offer a qualified health plan through a Small Business Health Options Program (SHOP) Exchange because the employer’s principal business address is in a county in Washington or Wisconsin in which a QHP through a SHOP Exchange won't be available for 2014. See Notice 2014–6. Similar relief is provided for certain counties in Iowa for 2015 and for certain counties in Wisconsin for 2016. See Notice 2015-8 and Notice 2016-75.
taxmap/pubs/p557-007.htm#en_us_publink1000199908

Trust fund recovery penalty.(p12)

rule
If any person required to collect, truthfully account for, and pay over any of these taxes willfully fails to satisfy any of these requirements or willfully tries in any way to evade or defeat any of them, that person will be subject to a penalty. The penalty is equal to the tax evaded, not collected, or not accounted for and paid over. The term person includes:
taxmap/pubs/p557-007.htm#en_us_publink1000199909
Exception.(p12)
The penalty isn't imposed on any unpaid volunteer director or member of a board of trustees of an exempt organization if the unpaid volunteer serves solely in an honorary capacity, doesn't participate in the day-to-day or financial operations of the organization, and doesn't have actual knowledge of the failure on which the penalty is imposed.
This exception doesn't apply if it results in no one being liable for the penalty.
taxmap/pubs/p557-007.htm#en_us_publink100053506

Certification Program for Professional Employer Organizations (CPEOs).(p12)

rule
The Tax Increase Prevention Act of 2014, enacted Dec. 19, 2014, requires the IRS to establish a voluntary certification program for professional employer organizations (PEOs). PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. For further information, go to: IRS.gov/for-tax-pros/basic-tools/certified-professional-employer-organization.
taxmap/pubs/p557-007.htm#en_us_publink1000199910

FICA and FUTA tax exceptions.(p12)

rule
Payments for services performed by a minister of a church in the exercise of the ministry, or a member of a religious order performing duties required by the order, are generally not subject to FICA or FUTA taxes.
taxmap/pubs/p557-007.htm#en_us_publink1000199911
FUTA tax exception.(p12)
Payments for services performed by an employee of a religious, charitable, educational, or other organization described in section 501(c)(3) that are generally subject to FICA taxes if the payments are $100 or more for the year, aren't subject to FUTA taxes.
taxmap/pubs/p557-007.htm#en_us_publink1000199912
FICA tax exemption election.(p12)
Churches and qualified church-controlled organizations can elect exemption from employer FICA taxes by filing Form 8274.
To elect the exemption, Form 8274 must be filed before the first date on which a quarterly employment tax return would otherwise be due from the electing organization. The organization can make the election only if it is opposed for religious reasons to the payment of FICA taxes.
The election applies to payments for services of current and future employees other than services performed in an unrelated trade or business.
taxmap/pubs/p557-007.htm#en_us_publink1000199913
Revoking the election.(p12)
The election can be revoked by the IRS if the organization fails to file Form W-2, Wage and Tax Statement, for 2 years and fails to furnish certain information upon request by the IRS. Such revocation will apply retroactively to the beginning of the 2-year period.
taxmap/pubs/p557-007.htm#en_us_publink1000199914
Definitions.(p12)
For purposes of this election, the term church means a church, a convention or association of churches, or an elementary or secondary school that is controlled, operated, or principally supported by a church or by a convention or association of churches.
The term qualified church-controlled organization means any church-controlled section 501(c)(3) tax-exempt organization, other than an organization that both:
  1. Offers goods, services, or facilities for sale, other than on an incidental basis, to the general public at other than a nominal charge that is substantially less than the cost of providing such goods, services, or facilities, and
  2. Normally receives more than 25% of its support from the sum of governmental sources and receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities that aren't unrelated trades or businesses.
taxmap/pubs/p557-007.htm#en_us_publink1000199915
Effect on employees.(p12)
If a church or qualified church-controlled organization has made an election, payment for services performed for that church or organization, other than in an unrelated trade or business, won't be subject to FICA taxes. However, the employee, unless otherwise exempt, will be subject to self-employment tax on the income. The tax applies to income of $108.28 or more for the tax year from that church or organization, and no deductions for trade or business expenses are allowed against this self-employment income.
Schedule SE (Form 1040), Self-Employment Tax, should be attached to the employee's income tax return.