As we approach the new year, 501(c)(3) leaders in Nevada are met with the task of adjusting to changes in the State Unemployment Tax Act (SUTA) taxes. With a hike in the taxable wage base scheduled for 2024, nonprofits in the Silver State will need to reassess their financial strategies to continue their commitment to good stewardship. Here’s a closer look at what’s changing and how adopting a reimbursing approach to unemployment could be beneficial.
Understanding Nevada’s 2024 SUTA Tax Changes
In the ever-changing landscape of employment taxes, being forewarned is being forearmed. Nevada’s taxable wage base for SUTA is set to rise:
- Taxable Wage Base Rise: The new taxable wage base for 2024 is slated to be $40,600, which marks a $500 increase from the 2023 base of $40,100.
What This Means for Your Nonprofit
An increase, even one that might seem as modest as $500, can add up significantly across your organization:
- Higher Tax Outlay: The taxable wage base increase means that Nevada nonprofits will be paying SUTA taxes on an additional $500 of each employee’s salary. For organizations with a significant number of employees, this can lead to a noticeable rise in overall tax expenditure.
- Budget Reevaluation: With greater tax liabilities on the horizon, it’s prudent for 501(c)(3) organizations to review their financial plans to accommodate these additional expenses.
The Reimbursement Option: A Potential Game-Changer
To navigate this uptick in SUTA costs, Nevada nonprofits have the option to consider a different route—becoming reimbursing employers. This alternative can offer several advantages:
- Pay-for-What-You-Use: Instead of paying preset tax rates, reimbursing employers only pay dollar for dollar for the unemployment benefits claimed by their former employees. This can be a cost-effective approach, especially for organizations with a low rate of turnover and unemployment claims.
- Expense Forecasting: Adopting a reimbursement plan allows for more accurate financial forecasting. Nonprofits can estimate costs based on actual employment patterns rather than projected rates that may not reflect their reality.
- Reduced Tax Liability: By only reimbursing the state for actual claims, 501(c)(3) organizations could potentially see a reduction in their overall SUTA tax liability, especially if their former employees claim fewer benefits than the maximum taxable wage base would suggest.
Nevada employers have until December 1, 2023, to notify the state of their decision to reimburse rather than pay SUTA in 2024.
Weighing Your Options
When considering the reimbursement method, it’s essential to:
- Assess Financial Stability: Make sure there’s a safety net to cover potential claims, as reimbursements can sometimes be significant and unexpected.
- Examine Administrative Capabilities: Ensure your team can handle the administrative aspects of managing unemployment claims, including documentation and timely payments.
- Consider Risk Management: Evaluate how the reimbursement model aligns with your organization’s risk tolerance and management strategy.
As the taxable wage base increases in Nevada, 501(c)(3) executives are tasked with making informed decisions to manage their tax liabilities effectively. The reimbursement method for unemployment taxes presents a compelling option for many nonprofits. It allows for greater control over expenses and could lead to substantial savings. With a strategic approach and proper planning, your organization can navigate these changes while continuing to focus on its core mission. Consult with a financial advisor to determine the best course of action for your unique circumstances and ensure your nonprofit remains on a solid financial footing.
501(c) Services has more than 40 years of experience helping nonprofits with unemployment outsourcing, reimbursing, and HR services. Two of our most popular programs are the 501(c) Agencies Trust and 501(c) HR Services. We understand the importance of compliance and accuracy and are committed to providing our clients with customized plans that fit their needs.
Contact us today to see if your organization could benefit from our services.
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(Photo by Quintin Gellar)
The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.