How can we help?

Types of tax exemptions

Being tax exempt means that an employee or employer is not required by law to contribute to a specific tax. When you add a tax exemption in Gusto for an employee or employer, we will not debit for this tax or report it on your filings.

  • 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. 
    • Most employers that have a reimbursable status will also need to set up their company type as Non-Profit in Gusto, and select Yes, we are a non-profit 501(c)(3) organization and are exempt from FUTA. 
    • Follow the instructions below, in addition to changing your company type:
      1. Go to the Company Details section of your account.
      2. Under each state's Tax Setup where you've approved reimbursable status, click the blue Manage Taxes link.
      3. Next to "SUI Reimburser", click the blue pen and then select Yes, we can reimburse the state if an employee collects SUI benefits—we don’t have to pay SUI taxes quarterly.
  • Employee Tax Status: Special exemptions may apply for Social Security, Medicare, Unemployment Insurance and other employment taxes for some employees. 
    • For example: for specific types of visas (J-1 and F-1), some business owners/corporate officers, pastors, etc.

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.

Payroll, benefits, HR and more.