The ERTC for Churches government program is alive and well. The good news is that there is still time to take advantage of this amazing federal tax credit program and get your church the money that is available to it. If you had employees during the pandemic then this is for you.
ERC for Nonprofits IRS Background
Due to the COVID-19 epidemic, some charity organizations only stayed afloat because they agreed with government regulations requiring them to suspend operations or reduce services temporarily.
While people may think that tax-exempt organizations are ineligible for a fully refundable government tax credit, such as Employee Retention Credit, this is not true.
Employee Retention Credit, also known by ERTC and ERC, is a government initiative accessible to taxpayers beginning in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to encourage businesses to retain staff during extensive disruptions caused by the pandemic.
The ERTC for churches allows religious organizations to claim on revised payroll tax returns for qualifying periods, provided they completed the eligibility requirements and they paid qualifying wages and benefits during those years.
Understanding How ERTC for Churches Works
Tax-exempt organizations are also considered to be engaged in business or trade regarding the entirety of their operations. So if a church continued to keep employees on the payroll despite the difficulties caused by the COVID-19 pandemic, they may still be eligible for significant cash relief in the form of a refundable Employee Retention Tax Credit.
At first, tax-exempt organizations that had secured loans under the Paycheck Protection Program (PPP) were not eligible to participate in the ERC. Later, legislators in the United States enacted the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which widened the standards for eligibility concerning the ERC.
The item was included in the Consolidated Appropriations Act of 2021, signed into law on December 27, 2020. The legislation was a component of a larger COVID-19 relief package.
As a result of the Tax Relief Act of 2020, church leaders who have received PPP loans are now eligible to apply for the ERTC. Because of this the ERTC was given an additional year, bringing its expiration date to the end of June 2021.
Because of the newly implemented restrictions, churches can now qualify for a non-refundable tax credit. In 2020, the maximum credit awarded to an employee was just $5,000; however, in 2021, that amount was increased to $28,000.
Even while the minister wages Employee Retention Credit is not applicable, it can apply to other members of the staff.
If your church is looking for any assistance with the process, please contact FTCO ERC to answer any questions or get a complimentary pre-qualification check.
Employee Retention Credit Eligibility Criteria for Churches
Your church might be qualified for the ERC, which is meant to aid your church in recovering from the financial effects of the COVID-19 pandemic.
Some of the criteria that gets evaluated include: if it experienced a significant decline in gross receipts during any calendar quarter, fully or partially suspended or had a significant reduction of its operations as a result of a mandate from the state, federal, or local government.
|ERC Year||Minimum Credit||Reported Form|
|2020||$5,000 Per Employee||Forms 941-X (Q2-4)|
|2021 (Q1)||$7,000 Per Employee||Form 941-X (Q1)|
|2021 (Q2)||$7,000 Per Employee||Form 941-X (Q2)|
|2021 (Q3)||$7,000 Per Employee||Form 941-X (Q3)|
Is Employee Retention Tax Credit Considered a Loan Like the PPP?
Many church leaders ignored the ERC because they rushed to apply for PPP loans and other COVID-related financial assistance initiatives.
However, if you apply for the ERTC, you may be able to get a significant return that will help you get back on track after the difficult past couple of years.
Employee Retention Tax Credit – Qualifying Requirements for Churches
The Employee Retention Tax Credit (ERTC) is a tax credit that eligible employers, including non-profit organizations and charitable groups, may use to keep employees on the payroll.
The good news is that there is no need for repayment because Employee Retention Tax Credit is not a loan. For most taxpayers, there is reasonable opportunity to get money back under this program. This applies to both businesses, nonprofits, as well as churches.
For the ERTC, churches that have their activities entirely or partly interrupted due to orders made by the governmental authority to limit travel, commerce, or group gatherings during the pandemic are eligible to be designated, eligible employers.
Employee Retention Credit Nonprofit Gross Receipts
To qualify for the Employee Retention Credit in any of the 2020 quarters beginning from March 12, gross sales must have decreased by at least 50 percent compared to the corresponding 2019 quarter.
Even better, your church may fulfill the criterion for gross revenues if it saw a decline of at least 20% in the first three quarters of 2021 compared to the corresponding quarter in 2019.
For the ERC in 2020, churches with fewer than 100 full-time employees (as determined, on average, in 2019) are entitled to the maximum available benefits, provided that they continue to qualify as an eligible employer by either the Gross Receipts Test or the Government Mandate Test.
This would remain the case even if there were a shift in the number of full-time workers at different points during the year. Nevertheless, this limitation was resolved for the 2021 ERCs by increasing the number of full-time employees required for eligibility to 500.
PPP Loan and the Employee Retention Credit
The qualifications to be eligible for the Employee Retention Credit are much like the requirements for Paycheck Protection Program.
When the ERTC was first permitted as part of the CARES Act, it was statutorily illegal for any organization that had previously received funds under PPP to claim an ERTC. This was done to prevent any organization from claiming ERTC more than once.
However, the regulatory barrier preventing Paycheck Protection Program members from receiving ERTC payments was eventually removed in December 2020. This came about due to the Consolidated Appropriations Act, which included provisions that expanded and enhanced the ERC.
How to Claim ERTC for Churches
Follow these instructions to claim ERC for the church successfully.
- Identify the criteria for Suspended Operations or Decline in Gross Receipts
- Next, determine the total amount of your eligible earnings, e.g., church gatherings.
- Apply the appropriate rate to each qualifying quarter (see the chart above for reference).
- Request a refund on your modified Form 941-X quarterly payroll tax return.
- If not, make an advance payment to receive your earned rate credit (ERC).
Qualifying for ERC is not quite as simple as it may seem. There is a significant amount of documentation to be completed for the IRS and qualifying requirements to be met. Consequently, working with an ERTC professional like ourselves is the best way to receive ERC in no time. Let us take you through our simple procedure, which consists of just a few steps.
- Complete the Questionnaire: Start with the ten simple questions to begin your ERTC claim.
- Pre-Qualification Check: Overview of the Qualification process
- Upload Data: Upload PPP documents, 941 returns, and payroll data on our secure portal.
- Credit Calculation: Get an accurate calculation of the credit you can receive from the IRS.
- Application Package: Get an expert’s help filing the 941-X Amended payroll returns.
- Get Paid from IRS: Receive an email from the IRS with your very own ERTC check.
At Federal Tax Credits ERC, we have completed many Employee Retention Tax Credit evaluations for churches and other nonprofit organizations.
We realize this is an amazing opportunity to bring much-needed finances back, and don’t want you to lose out on this opportunity.
To assist your church in obtaining the funds that are rightfully owed, our team is prepared to analyze the benefit of the ERTC, calculate the potential credits available, and make any necessary form revisions.
We suggest you schedule your obligation-free pre-qualification check today by completing the Federal Tax Credits ERC questionnaire.
We look forward to serving you in any way we can.
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