Square won't calculate employer taxes correctly for our non profit payroll

[mzloretta]

501 (c) 3 non profit corps are exempt from FUTA and some state and local taxes.  When I realized Square was charging our company for taxes we don't owe, they said they couldn't change their system ... leaving us having to pay a lot more money for employees than we legally owe.  This is bad.  We will be discontinuing Square as soon as possible.  

[VanKalkerFarms]

501 (c) 3  is an option for business type while signing up for Square Payroll, which I assume you are listed as.  beyond that I can't guess what options they do and don't have but since it is a federal law I sure would think they follow it as they process payroll in lots of states now.  @katieand who would be best to talk to for Payroll?

https://www.irs.gov/charities-non-profits/exempt-organizations-what-are-employment-taxes

[mzloretta]

Even though the non profit option is listed, it's not true.  I finally got through to a supervisor who said they were working on fixing the tax exemptions, but cannot exempt FUTA and can only only exempt some state and local taxes at this time.  Their support people are, so far, completely cluless about this.  For some 501 (c) 3's, this can result in thousands of dollars in employer taxes paid that they do not owe legally owe.    This is a real problem for Square.  Until they get their act together, they should stick to for profit companies.  I'm talking to Gusto now and it looks like they can handle these exemptions.

[EJ_]

Hi @mzloretta

Thanks for sharing your feedback around this and sorry for the confusion. We can do a better job at communicating this to our Payroll customers. 

You're correct, as there are only a handful of states that can be Unemployment Insurance exempt at the moment.

We’re definitely working to expand this so it’s available to more sellers. Keep an eye out for updates in the near future.

[BCLEMMEN]

Well, it's two years later, and I just finished sending in an amended 940 for tax year 2020 to ask the IRS to refund the money that Square sent to them for FUTA that we do not owe because we are a 501(c)(3).  I have hopes that in 6 months or so we might get our money back. Patriot, OnPay, Gusto, and ADP properly exempt nonprofits from FUTA. Square should be pretty embarrassed.