Employee Retention Tax Credit for Nonprofits

Merrik Kressley • Apr 05, 2023

The COVID-19 pandemic has had a significant impact on the global economy, and nonprofits are no exception. To help mitigate the impact of the pandemic on nonprofits and their employees, the US government introduced the Employee Retention Tax Credit (ERTC) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020.

The ERTC is designed to incentivize employers to keep their employees on payroll during the pandemic by providing a refund of up to $26,000 per employee. Nonprofits are eligible for this tax credit, provided they meet certain criteria. In this blog post, we will discuss the ERTC in detail, including the eligibility criteria and how nonprofits can claim the tax credit.

Eligibility Criteria for Nonprofits

To be eligible for the Employee Retention Tax Credit (ERTC), the organization must have experienced one of the following three events:

The organization experienced a significant decline of 50% in gross receipts in a quarter of 2020 compared to the same quarter in 2019. For 2021, they must have experienced a decline of 20% in any quarter of 2021 compared to the same quarter in 2019.
If the organization had operating restrictions on their business due to a government mandate. It is extremely important that this mandate comes from a governmental agency. Additionally, suggestions or recommendations for social distancing are not sufficient for shutdown eligibility. For example, a CDC, OSHA or WHO suggestions for social distancing.
If a business was started after 2/15/2020, they are considered a Recovery Start-up Business and are automatically eligible for Q3 and Q4 of 2021, provided they meet a few other criteria.

If a nonprofit meets any of these criteria, it can claim the ERTC for each quarter in 2020 and 2021 that one of these occurred.

How to Calculate the ERTC for Nonprofits

The ERTC is calculated the same way for a nonprofit organization as a for-profit organization. However, since there are no owners of a non-profit organization, there are no W-2 employees that will need to be excluded from ERC.

How to Claim the ERTC for Nonprofits

The ERTC, is a very complicated program with many nuances and details that are important to take into consideration. Therefore, it is advisable to use an expert consultant in order to ensure that it is completed properly and within all the IRS’ guidelines.

You can contact our team today to confirm your eligibility and begin the filing process.

The post Employee Retention Tax Credit for Nonprofits appeared first on ERC Funding.

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