Being tax exempt means that an employer or employee is not required by law to contribute to a specific tax. When you add a tax exemption in Gusto, we won't debit for that tax or report it on your filings. We highly recommend that you consult with a CPA or other tax professional to confirm if you or your employee is tax exempt before making any changes to your Gusto account.
If your accountant is added in Gusto, we encourage you to have a discussion with them and they can set this up. If you don't have your accountant added in Gusto, we recommend you add them.
If you don't have an accountant, use our Partner Directory to find one that best suits your needs.
Some tax exemptions, like income tax exemptions, need our assistance—contact us from the Help or Priority support section of your account to set these up.
Employer Tax Status: Under section 501(c)(3) of the Internal Revenue Code, the IRS establishes that qualified non-profits (i.e. charitable, religious, and political organizations), are exempt from Federal Unemployment Insurance Tax (FUTA). Occasionally, other employers and some employees may also be exempt from other employment taxes.
Reimbursable employer: Certain employers, such as religious organizations and certain nonprofit employers, may have a choice to reimburse their state for the amount of unemployment claim benefits paid by the state to the employer's terminated employees. Employers have an account with the state and are charged dollar-for-dollar for benefits paid to their prior employees.
Employee Tax Status: Special exemptions may apply for Social Security, Medicare, Unemployment Insurance and other employment taxes for some employees.
Make sure to consult with your accountant or a CPA before adding an exemption.
Contact us from the Help or Priority support section of your account if you need additional assistance setting up an exemption.
Once you’ve verified your company is not liable to pay a tax, you can set up a company-wide exemption in your account.
Once the exemption is set up, no wages will be reported for this tax, and we won't file for this tax with the corresponding agency. If the company becomes liable for this tax in the future, it's the company’s responsibility to remove the exemption or contact us in order to remove the exemption.
Some tax exemptions, like income tax exemptions, need our assistance—contact us from the Help or Priority support section of your account to set these up.
Before setting up an exemption for your employee, make sure they're actually tax-exempt and not exempt from withholding.
Exempt from withholding
Tax-exempt
We won't withhold tax amounts for your employee in upcoming payrolls starting on the selected effective date.
You can change the effective date of company-wide tax exemptions by following the steps below.
You can only cancel tax exemptions with an upcoming effective date.
Use the dropdowns below to learn how to remove tax exemptions.
You can only remove tax exemptions if they're scheduled for the future, or if the employee hasn't been paid yet.
If you need to remove a tax exemption after an employee has been paid, contact us from the Help or Priority support section of your Gusto account.
If you already ran payroll but forgot to set up a tax exemption, we can help you fix these past payrolls.
Our support team will use this information to correct the payrolls that didn't include that tax exemption.
Ministers may be given an official housing allowance that is excluded from taxable gross wages. Here's how to set up a housing allowance in Gusto:
Ministers may be exempt from certain taxes such as Social Security and Medicare—refer to the Topic 417 - Earnings for Clergy for more details on how to request these tax exemptions with the IRS.
Once you've confirmed that the minister is exempt from these taxes, set up the tax exemption in Gusto in the People section.
Gusto connects to Aplos Accounting and can automatically track your payroll and tax payments. We also support the W-2 requirements and unique church payroll needs for pastor housing allowances and tax exemptions.
Gusto is required to collect and remit sales tax on your Gusto subscription in certain states. See the full list of required states and/or cities that Gusto is required to collect and remit sales tax is at the end of this section.
Sales tax on services like Gusto’s varies by jurisdiction. If a jurisdiction considers any of our products as taxable, we’re required to collect and remit sales tax.
The company filing address stored in Gusto is used to determine the tax rate, and the tax charged will appear as a separate line item on your monthly invoice.
If you're a Gusto Partner, your clients may be charged sales tax on their Gusto subscription based on their filing address stored in Gusto.
Some, but not all charitable, religious, scientific, or educational organizations may be exempt from sales tax.
If you're a Gusto customer and would like to apply for sales tax exemption, contact us.
Gusto partners with Avalara who will be validating tax exemption certifications on your behalf. Exemption validation typically takes 5-7 business days. If your application is approved before the end of the month, you will not be charged sales tax for the month, or months thereafter, so long as Gusto has valid proof of exemption as permitted by applicable law.
States
*In applicable jurisdictions only.