Lesson 3.4: Payroll Tax Setup

Compliance is one of the most critical aspects of nonprofit payroll. FastFund Payroll is equipped with a continuously updated Tax Engine that includes tax tables for federal, state, state supplemental, and local income taxes. While Araize automatically updates the underlying tax brackets, you must configure how these taxes apply to your specific organization.

Before configuring your taxes, ensure you have established your Liability and Expense general ledger accounts in FastFund Accounting, and that your government tax payees (e.g., US Treasury, State Department of Revenue) are set up in the Other Names entity list.

Important System Rule: You cannot add or edit new taxes if you currently have an open payroll batch. If you need to edit your payroll taxes, all open batches must be deleted first.

[INSERT SCREENSHOT: The ‘Taxes’ tab within the Payroll Settings window, showing the Tax Engine version at the top and the list of default Federal and State taxes below]

Configuring Default Federal Taxes FastFund provides three default federal taxes: FIT (Federal Income Tax), Soc Sec (Social Security), and Medicare.

Note for Nonprofits: Most nonprofit organizations are exempt from Federal Unemployment Taxes (FUTA). If your organization is exempt, you do not need to set up a FUTA tax type.

To configure your default federal taxes:

1. Navigate to Administration > Payroll Setup and click on the Taxes tab.
2. Click on FIT from the Tax Types list to open the Tax Details window.
3. In the Payee field, select the appropriate payee (e.g., Department of the Treasury) from your Other Names list.
4. In the Liability Account field, select the FastFund Accounting general ledger liability account where FIT withholdings will be posted.
5. Click SAVE.
6. Repeat this exact process for both Soc Sec and Medicare.

Why is there no Expense Account or Federal ID field here? Your Federal Tax ID is automatically pulled from your core Company Information. Additionally, the expense accounts for employer-matched Social Security and Medicare are configured later during the individual employee payroll distribution process, not on this global tax screen.

Adding State Income Tax (SIT) If your employees are subject to State Income Tax, you must add it manually:

1. From the Taxes window, click the New + icon.
2. From the Type drop-down, select SIT.
3. Select your state taxing authority in the Payee field.
4. Enter your organization’s state reporting ID in the Tax ID/Number field (this is a required field that will print on the employee’s W-2).
5. Enter the Liability Account.
6. Click SAVE.

[INSERT SCREENSHOT: The ‘Tax Details’ pop-up window for configuring SUTA, highlighting the specific fields for State, Limit, and Percentage Rate]

Adding State Unemployment Tax (SUTA) State Unemployment Insurance rates and limits vary by employer and state. FastFund calculates the tax and generates the SUTA reports, but you are responsible for maintaining the accurate limits and rates.

1. Click the New + icon and select SUTA from the Type drop-down.
2. Enter the Payee, your organization’s Tax ID/Number, and the Liability Account.
3. From the State drop-down, select your specific state.
4. In the Limit field, enter your state’s current SUTA wage limit (e.g., 17,500.00).
5. In the Percentage Rate field, enter your organization’s assigned rate as a whole percent. (Example: If your SUTA rate is 2.1%, enter it exactly as 2.1. If your rate is 0.5%, enter 0.5).
6. Click SAVE.

Supplemental and Local Taxes If your nonprofit is subject to local city/county taxes or state supplemental taxes (such as state disability or employment training taxes), use the New + icon to select Local or Supplemental. The system will prompt you for the specific state, county, or local authority to ensure accurate reporting. For employer-paid supplemental taxes, you will also be required to enter an Expense Account alongside the Liability Account.

Inactivating a Tax Once a tax has been used in a posted payroll, you are permanently prevented from deleting it. If your organization or an employee is no longer subject to a specific tax, you must open the tax details and click the Inactive check box.