Employee Retention Tax Credit (ERTC)

The Employee Retention Credit is a valuable tax credit available for time periods from March 13, 2020 to December 31, 2021 for qualifying organizations – and it can be claimed retroactively. Because this credit is claimed on a payroll tax form rather than a year-end tax return, organizations that do not file a tax return, such as churches, can still take advantage of this fully-refundable credit.

In 2020, the credit is limited to 50% of qualified wages paid between March 13, 2020 and December 31, 2020. If you received forgiveness for a PPP loan, that does not exclude you from claiming the ERTC, but the interplay between qualified wages used for each program must be carefully calculated.

In 2021, the credit is limited to 70% of qualified wages per quarter for each employee. That can be up to $7000 per employee per quarter, which can be a huge savings.

The definition of qualified wages differs based on the year and other factors, but generally includes wages paid and health insurance benefits paid by the employer up to $10,000 per quarter. Unfortunately, most ministers’ wages will not qualify as wages based on the definition, but administrative employees or non-pastoral ministry leaders wages will typically qualify.

The first step for any organization is to identify if your organization is eligible for the ERTC. To qualify, generally the organization must have:

  1. Been subject to full or partial suspension of activities based on governmental orders, OR
  2. Had a decline of gross receipts (excluding PPP funds and a couple other Covid-19 Relief programs) of 20% in 2021 or 50% in 2020 over comparable periods (which differs by time).

If your organization experienced a significant decline in receipts or was subject to restricted activity based on a governmental order during 2020-2021, please reach out to find out if you may be eligible for this valuable tax credit.

This information is not intended to constitute tax advice. Because the rules can be complicated, we recommend consulting with a tax or accounting professional to determine eligibility and complete the proper filings.

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