As many nonprofit organizations know, processing payroll can be tricky when it comes to federal and state rules and regulations. If a nonprofit fails to file the appropriate documentation and information according to IRS regulations and state laws, they can face harsh penalties and fees or even lose their tax-exempt status. With the complicated classifications and rules the IRS issues for nonprofit organizations regarding payroll taxes, many look into outsourcing to a payroll service provider for assistance.

Nonprofits Analyze Needs Regarding Payroll Service Providers

When considering the amount of IRS classifications and the different state regulations, nonprofit organizations looking to outsource their payroll should proceed with caution when selecting a provider. After analyzing their organizational needs, nonprofits should make sure the payroll service provider they select has experience and can provide references or testimonials from other organizations with similar needs or classifications. Also, nonprofits should compare pricing and payments for the services the provider offers with their budget, making sure the costs fit within the organizational needs by not fluctuating, or annually raising costs.

Nonprofits Depending on Efficiency Outsource Payroll Processes

Throughout recent years, many nonprofits have struggled because of the economic uncertainty and depend not only on their tax-exempt status, but also on managing their labor costs. In order to efficiently track and manage their labor force, a nonprofit should look for a payroll provider that offers customizable reporting along with either an integrated time and attendance system or a way to seamlessly import information from existing time clocks. And, since failing to provide quarterly or annual payroll tax document, with the federal or state government for three consecutive years can cause a nonprofit to lose their tax-exempt status, nonprofits should select a provider that tracks filing dates and prepares the required documents for the organization and employees.

While considering the organizational needs and the payroll service provider options, ask about the following:

• How does the non profit payroll service provider track and store data regarding salary, wages, bonuses and commissions?
• Can the payroll service provider prepare forms required for multiple states?
• Can they file your FICA taxes using the Electronic Federal Tax Payment System (EFTPS)?
• How easily can you add or delete employee information or make employee changes within their system?
• How can you track cash compensation in their system?
• Can you track benefits related information such as 403(b) contributions?

Payroll outsourcing can relieve administrative burdens and save valuable time and money for nonprofit organizations. Finding the right one just takes a little research and knowing the right questions to ask for your organization.