The year 2024 marks yet another tax increase by the state of Oklahoma, spotlighting the trend of rising unemployment costs. This has direct implications for employers, especially in the nonprofit sector.
Starting from 2020, there has been a steady climb in the taxable wage base in Oklahoma. Here’s a quick year-over-year snapshot:
- 2020: $18,700
- 2021: $24,000
- 2022: $24,800
- 2023: $25,700
- 2024: An announced increase of 5.1%, bringing the total to $27,000
This continuous upward trajectory is noteworthy. For the fifth year in a row, the wage base sees an increase, which inevitably translates to potentially higher unemployment tax liabilities for employers.
Annual SUTA Tax Rate Notifications in November
Oklahoma employers every November receive their new SUTA (State Unemployment Tax Act) tax rates. Especially for our 501(c)(3) nonprofits, this is a crucial time to be vigilant. Given the consistent upward trend of the taxable wage base, this year might see another possible rate hike. Ensure your finance teams are prepared and look out for these notifications to plan your budgets and strategies accordingly.
Considering the Alternative:
Reimbursing Option for 501(c)(3) Nonprofits
While the upward trend can be concerning for many, it’s essential to remember that 501(c)(3) nonprofits have an option aside from the traditional unemployment tax method.
Instead of paying unemployment taxes, these organizations can choose the reimbursing method. This means nonprofits would reimburse the state only for the actual unemployment benefits paid to their former employees, rather than paying a tax based on their payroll.
Here are some of the potential benefits:
- Cost Efficiency: Nonprofits might end up paying less in reimbursements than in taxes, especially if they have a stable workforce and few claims
- Flexibility: There’s no prepayment. Nonprofits pay only when an unemployment claim is made by a former employee.
- Control: Nonprofits can be more proactive, knowing they only pay for actual claims. They can focus on reducing turnover and implementing practices that minimize unemployment claims.
However, this method also comes with its challenges. Since the employer is now paying dollar-for-dollar for the unemployment benefits of their separated employees, it’s wise to dedicate funding for these possible expenses. It’s crucial for nonprofits to weigh the pros and cons based on their unique circumstances and make an informed decision.
Oklahoma employers have until January 30, 2024, to notify the state of their decision to reimburse rather than pay SUTA.
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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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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
