Page 251 - Washington Nonprofit Handbook 2018 Edition

(ii) Verification of Worker Identity and Eligibility to Work

Employers are required to verify that each new employee is legally eligible to

work in the United States. This includes completing the U.S. Citizenship and
Immigration Services (“USCIS”) Form I-9, Employment Eligibility Verification.
Employers can obtain this form from USCIS offices or by visiting the USCIS website
at http://www.uscis.gov. Employers must maintain completed Forms I-9 in their
files for three years after the date of hire or one year after the date employment
ends, whichever is later.

(iii) Federal Income Tax Withholding and Social Security
Contributions

Employers are required to pay Social Security and Medicare taxes (commonly
referred to as “FICA taxes”) on income paid to their employees. An employer is
required to pay 6.2% in Social Security tax and 1.45% in Medicare tax on each
employee’s gross earnings (up to specified amounts). The employee must
contribute the same amount. And while many nonprofit organizations are exempt
from federal corporate income tax under section 501(c)(3) of the Internal Revenue
Code (the “Code”) and thus do not have to pay federal corporate income tax
themselves, they must still withhold federal income tax from the pay of their
employees.

It is extremely important to properly withhold and timely deposit the
employee’s and employer’s share of taxes owed. Failure to make such deposits will
subject the employer to civil fines and penalties, and possibly criminal liability. In
addition to making the required deposits, employers are required to complete a
federal tax return showing the amounts withheld and deposited. This tax return,
called a Form 941, must be timely completed and filed with the IRS. Failure to file
the form or late filing will result in civil penalties. For more information on
payment, withholding and filing requirements, see IRS Publication 15, (Circular E),
Employer’s Tax Guide (2018), at http://www.irs.gov/publications/p15, and IRS
Publication 15-A, Employer’s Supplemental Tax Guide (2018), https://www.irs.gov/
pub/irs-pdf/p15a.pdf.

(iv) Federal Unemployment Taxes

Employers also are required to pay Federal Unemployment Taxes (“FUTA”)
for each employee. The employer pays the full amount of this tax and may not
deduct any portion of the tax from its employee’s wages. An employer that is

exempt from income tax under section 501(c)(3) of the Code is also exempt from

WASHINGTON NONPROFIT HANDBOOK -240- 2018