What is the employee retention credit for churches and places of worship?
The COVID-19 pandemic has posed unprecedented challenges for many churches, places of worship, ministries and clergies, putting immense financial strain on their operations. Fortunately, the Employee Retention Credit (ERC) offers a lifeline, helping religious organizations retain employees during these trying times.
This essential cash refund via payroll tax is designed to provide relief for non-profits with gross receipts decline of -50% or more the previous year (2020 vs. 2019) or a -20% or more loss (2021 vs. 2019).
There are other ways to qualify since many in-person religious services were not allowed, and then faced capacity restrictions throughout the pandemic, harming funding and donations for many nonprofits.
Key ERC Credit Takeaways You Will Learn:
- Understanding ERC for Religious Entities: Grasp the basics of the Employee Retention Credit specifically for churches and religious organizations.
- Eligibility & Requirements: Discover the unique eligibility criteria and requirements for churches to qualify for the ERC.
- Calculating ERC & Claiming Process: Master how to calculate the maximum credit and navigate the claiming process for your religious organization.
- Maximizing ERC Benefits: Learn strategies to identify eligible expenses and understand the tax implications to maximize the ERC benefits.
- Case Studies & FAQs: Gain insights from real-life cases and common FAQs about the Employee Retention Credit for churches and places of worship.
See Important 2024 Employee Retention Tax Credit Deadline Information at the Bottom of This Article.
Understanding The Employee Retention Credit (ERC) For Churches And Places Of Worship
Learn about the ERC and its application to religious organizations, including eligibility criteria and its interaction with other COVID-19 relief provisions for your ministry or clergy.
What Is The ERC, And How Does It Work For Religious Organizations?
The Employee Retention Credit (ERC) is a valuable tax relief measure designed to help eligible employers, including churches and religious organizations, retain employees during the challenging times of the COVID-19 pandemic.
Religious organizations can benefit from this provision if they meet specific eligibility criteria. For instance, they must have experienced a significant decline in gross receipts or faced full or partial suspension of operations due to government mandates related to COVID-19.
Eligibility Criteria For ERC Church Or Religious Organization
Understanding the eligibility criteria for the Employee Retention Credit (ERC) is crucial for churches and places of worship to take advantage of this financial relief program. Here are the key factors that determine if your organization qualifies:
1. You must be an eligible employer, which includes tax-exempt churches and other religious organizations.
2. Your organization must have experienced a significant decline in gross receipts, typically defined as a drop of 50% or more compared to the same quarter in 2019.
3. Alternatively, you may qualify if your church’s business activities were fully or partially suspended due to any government orders or mandates related to COVID-19.
4. For the year 2020, the ERC applies to qualified wages paid from March 12 of the prior calendar quarter through December 31 immediately preceding the calendar quarter, while for 2021, it applies for all four quarters.
5. The credit only applies to wages paid by an employer who has received a Paycheck Protection Program (PPP) loan if they meet certain specific requirements.
6. In 2020, employers with over 100 full-time employees can only claim ERC for employees who are not working but are still being paid; however, in 2021, this number increases for employers with fewer full-time employees and over 500 full-time employees.
7. Churches and non-profits with gross receipts of less than $1 million in gross receipts during the same quarter of the preceding year may also qualify.
It is essential for small to medium-sized business owners, including many church leaders and administrators within religious organizations, to understand these eligibility criteria and consult with a tax professional or accountant as necessary when claiming the Employee Retention Credit on their Form 941 filings.
Interaction Of ERC With Other COVID-19 Relief Provisions
The Employee Retention Credit (ERC) is just one of the many COVID-19 relief provisions available for churches and places of worship. It’s essential to understand how these relief measures interact with each other in order to maximize your organization’s financial relief.
For instance, if you received a Paycheck Protection Program (PPP) loan, it can impact the amount of ERC you may qualify for, as you cannot claim the credit on wages paid using the PPP loan funds.
It’s also worth noting that while PPP loans are forgivable under certain conditions, ERC offers immediate cash refunds through payroll tax reduction without requiring repayment.
To make informed decisions about which COVID-19 relief programs best serve your organization’s needs, consult with a tax professional or accountant who understands relevant laws and regulations.
Benefits Of Employee Retention Credit For Churches And Places Of Worship
The Employee Retention Credit provides financial relief during the pandemic, enables churches and places of worship to retain their employees, and offers cash refunds through a payroll tax.
Providing Financial Relief During The Pandemic
The Employee Retention Credit (ERC) provides much-needed financial relief to churches and places of worship struggling during the pandemic. The credit allows eligible employers to receive a cash refund through their payroll tax, which can help them retain employees and continue serving their communities.
This relief is especially crucial for smaller or medium-sized non-profit organizations with limited resources, which may have been hit hard by the pandemic’s economic impact. By helping to cover employee wages, the ERC enables religious organizations to maintain operations and fulfill their mission despite challenging circumstances.
Ability To Retain Employees And Continue Serving The Community
The Employee Retention Credit (ERC) provides financial relief to churches and places of worship during the pandemic. By retaining employees, religious organizations can continue serving their communities in meaningful ways.
Churches may be eligible for a maximum credit worth up to 50% of wages paid to an employee, helping them keep talented staff members onboard during challenging times. The credit is available for non-profits with gross receipts below $1 million in the preceding year and applies to eligible wages paid through December 31, 2021.
Cash Refunds Through Payroll Tax of Qualified Wages
The Employee Retention Credit (ERC) offers a significant financial benefit for churches and non-profits during the COVID-19 pandemic. The credit provides cash refunds through payroll tax to eligible employers, helping them retain their employees and continue serving their communities.
Churches can claim up to 50% of qualified wages paid to employees, worth no more than $5,000 per employee in 2020. In 2021, the ERC is still available, though the eligibility criteria and maximum credit amount may have changed.
Non-profits with gross receipts of less than $1 million in the preceding year are eligible for this valuable disaster tax relief act measure.
Requirements For Churches And Religious Organizations To Qualify For ERC
To qualify for the Employee Retention Credit, churches and religious organizations must have tax-exempt status under Internal Revenue Code Section 501(c)(3) and pay employee wages that are subject to federal payroll taxes while also providing a reasonable basis for determining qualified wages.
Separation Of Church And State Concerns
For many churches and religious organizations, there may be concerns about the separation of church and state when it comes to claiming Employee Retention Credit. While these concerns are understandable, it is essential to note that eligibility for the credit is based on financial criteria rather than any religious affiliation or activity.
Additionally, claiming credit does not mean that a church or religious organization is receiving special treatment from governmental authority. The Employee Retention Credit is available to all eligible businesses, government mandates, and non-profits who have been impacted by COVID-19.
Organizations should consult with a tax professional or accountant to ensure they are following all appropriate guidelines when claiming this credit.
Tax-exempt Status And Employee Compensation
For churches and religious organizations to qualify for the Employee Retention Credit, they must have tax-exempt status under the Internal Revenue Code. It’s important to note that this credit only applies to employees who are paid wages subject to federal payroll taxes, including the Social Security tax and Medicare taxes.
Non-profits should ensure that they’re paying their employees properly and accurately reporting their compensation on Form W-2 each year.
To calculate the maximum amount of credit available, non-profit organizations can use qualified wages paid between March 12, the third quarter, and the fourth quarter of 2020, through December 31, the third and fourth quarter of 2021, as a benchmark.
These qualifying wages include salary or hourly pay but exclude benefits such as medical or life insurance premiums.
It’s essential for churches and non-profits alike to consult with a tax professional or accountant when determining eligibility and maximizing potential tax savings.
Calculating The Maximum Amount Of Credit
To determine eligibility and calculate the maximum amount of credit available for Employee Retention Credit (ERC), an eligible employer should consider two factors: qualified wages and their gross receipts.
The ERC is equal to 50% of qualified wages paid to an employee, up to a maximum credit of $5,000 per employee in 2020. However, in 2021, the maximum credit has increased to $7,000 per quarter for each qualifying employee.
Additionally, eligible employers must also consider their gross receipts—the total revenue minus returns and allowances—during specific quarters. To qualify for ERC in 2020, they must have experienced either a full or partial suspension of operations due to government mandates or have seen a significant decline in quarterly gross receipts as compared to the same calendar quarter in 2019.
For non-profit, tax-exempt organizations like churches and places of worship with less than $1 million annual gross receipts from business activities unrelated to prior years are allowed tax credits on all qualified wages paid during this period even where business is not fully shut down but face lessened activities because adherents do not come out much as before especially when church attendance was a largely physical pre-pandemic era.
Qualifying Wages And Payroll Tax Credits For ERC
To qualify for the Employee Retention Credit, churches and places of worship must pay eligible employee wages between March 12, 2020, and December 31, 2021, which include compensation for time worked and certain types of health benefits.
Eligible Employee Wages
To qualify for the Employee Retention Credit (ERC), churches and nonprofit organizations must pay eligible wages to employees. Eligible wages include amounts paid between March 12, 2020, and December 31, 2021 that meet certain criteria.
For example, wages paid to an employee who is not actively working due to a full or partial shutdown of operations may be eligible.
It’s important to note that the credit applies only to wages paid up to $10,000 per employee per quarter in 2021. This means that even if an employee earns more than $10,000 in a quarter, only the first $10,000 will be considered when calculating the credit amount.
Furthermore, employers should keep accurate records of all payroll tax deposits and filings because they will apply toward any potential ERC refund.
Interaction With Other Tax Credits And Deductions
The Employee Retention Credit (ERC) can be used in conjunction with other tax credits and deductions. However, the same wages cannot be counted for both the ERC and Paycheck Protection Program (PPP) loan forgiveness or Families First Coronavirus Response Act (FFCRA) paid leave credit.
In this case, employers must choose which benefits to use for those wages. Additionally, any eligible expenses claimed for the ERC cannot also be used as a deduction on taxes.
It is important to understand how these programs interact with each other in order to maximize financial relief and minimize potential conflicts.
How To Claim The Employee Retention Credit
To claim the Employee Retention Credit, churches and non-profit organizations need to file Form 941 for quarterly payroll tax returns and may be eligible for retroactive credits for previous quarters; read on to learn more about this process.
Filing Form 941 For Quarterly Payroll Tax Returns
To claim the Employee Retention Credit, eligible organizations such as churches and non-profit organizations need to file Form 941 for quarterly payroll tax returns. This form is used to report wages paid, tips received by employees, and any taxes withheld during the quarter.
When completing Form 941, it’s critical to ensure that all information is accurate and up-to-date. Any mistakes could lead to delays or even disqualification from receiving the credit.
For instance, if your church services has fewer full-time employees than before but you still qualify for ERC because of some other factors like the significant decline in your church’s gross receipts as of at least one of the first calendar quarter as compared with the same calendar or same quarter last year then also it will be helpful if you get advice from professionals about how much credit may apply in such cases as well as assistance with completing all necessary paperwork correctly.
Retroactive Credits For Previous Quarters
In addition to receiving credits for current and future quarters, eligible churches and non-profits can also claim retroactive credits for previous quarters. This means that if an organization was eligible but didn’t claim the credit in prior quarters, they can make adjustments on their payroll tax filings and receive a refund or offset future payroll taxes.
For example, if a church qualified for $10,000 in credit based on wages paid from April to June 2020 but neglected to file Form 941 by September 30 of that year, they could submit an adjusted form now and receive the full amount as a refund.
It’s important to note that retroactive credit claims must be made within three years of filing the relevant tax return.
Adjusting Previously-filed Forms
If you have already filed Form 941 and want to claim the Employee Retention Credit, don’t worry – you can still adjust your forms to claim the credit retroactively. You can file an amended Form 941-X for the relevant quarter(s) and claim any credits that you were eligible for the applicable quarter but did not originally claim.
It’s important to note that amending previously-filed forms is a complex process that should be done with care. Seeking guidance from a qualified tax professional or accountant can help ensure that you are claiming all of the credits that are available to your organization while avoiding any potential errors or penalties.
Maximizing The ERC For Churches And Places Of Worship
To maximize the benefits of the Employee Retention Credit, eligible churches and religious organizations should identify all eligible expenses, understand tax implications, and seek professional guidance from a knowledgeable financial advisor or accountant.
Identifying Eligible Expenses To Maximize Credits
To maximize the Employee Retention Credit (ERC), it is crucial to identify eligible expenses that qualify for the credit. Some examples of qualifying wages include salaries, health benefits, and sick leave payments made to employees.
In addition, churches and non-profits may be able to claim the ERC for expenses related to maintaining operations during the pandemic.
To ensure eligibility and accurately calculate maximum credits, it is advisable to consult with a tax professional or accountant who understands the intricacies of applying for relief measures such as ERC.
Understanding The Tax Implications Of ERC
It’s important for churches and non-profits to understand the tax implications of utilizing the Employee Retention Credit (ERC). While the credit can provide much-needed financial relief during these challenging times, it is still subject to federal payroll taxes, including social security and Medicare taxes.
Additionally, organizations must ensure they apply for the credit correctly and accurately report their eligibility to avoid any potential issues with the IRS. It’s highly recommended that businesses consult with a tax professional or accountant to navigate the complexities of claiming ERC and ensure compliance with all applicable regulations.
Facts: The ERC is subject to federal payroll taxes such as social security taxes and Medicare taxes. Organizations must accurately report their eligibility for credit to avoid any potential issues with the IRS.
Seeking Professional Guidance And Resources
It’s important for churches and non-profits to seek professional guidance and resources when determining their eligibility for the Employee Retention Credit. This credit can be complex, and there are many factors that can affect how much a church or non-profit may qualify for.
For example, the tax credit is only available to organizations with gross receipts of gross sales of less than $1 million in the preceding year. Additionally, expenses attributable to a PPP loan cannot also be used as qualified wages for this tax credit.
Common FAQs About Employee Retention Credit For Churches And Places Of Worship
This section answers commonly asked questions about the Employee Retention Credit for Churches and Places of Worship, including interaction with PPP and FFCRA, eligibility criteria, and claiming retroactive credits.
Interaction With PPP And FFCRA
The Employee Retention Credit (ERC) can interact with other COVID-19 relief provisions, such as the Paycheck Protection Program (PPP) and the Families First Coronavirus Response Act (FFCRA).
However, there are rules that must be followed to prevent double-dipping. For example, if a non-profit organization receives PPP funds, it cannot use those same wages for the ERC calculation.
Similarly, if an employer claims FFCRA tax credits for providing paid sick or family leave to employees affected by COVID-19, those same wages cannot be used for the ERC calculation.
It’s important for churches and non-profits to work with their accountants or tax professionals to ensure they are following all guidelines and maximizing their benefits from different COVID-19 relief measures.
Eligibility Criteria And Claiming Retroactive Credits
To qualify for the Employee Retention Credit (ERC), churches and non-profits must have experienced a significant decline in gross receipts or a full or partial suspension of operations due to COVID-19.
If your organization is eligible, you may claim retroactive credits for wages paid as far back as March 12, 2020. This means that if you did not claim the ERC on previous payroll tax returns, you and the eligible employer might file amended forms to receive full credit for qualifying wages paid during each applicable quarter.
By taking advantage of retroactive credits, qualifying organizations can receive much-needed financial relief during these challenging times.
Deadline For Claiming The Credit
It’s important to note that the deadline for claiming the Employee Retention Credit (ERC) has been extended. Businesses and non-profits can now claim the credit on qualified wages paid from March 12, 2020, through December 31, 2021.
This means that if you haven’t yet claimed the ERC for previous quarters, you may still be eligible to do so. It’s crucial to ensure that your accounting practices are up-to-date and accurate when filing for this credit.
Case Studies: Examples Of Churches And Places Of Worship Utilizing Employee Retention Credit
Read on to discover real-life examples of eligible expenses and maximum credits that churches and places of worship have utilized through the Employee Retention Credit.
Real-life Examples Of Eligible Expenses And Maximum Credits
Here are some real-life examples of how churches and places of worship have utilized the Employee Retention Credit (ERC) to their advantage. One church in Texas claimed a significant amount of credits for eligible wages paid to employees during the third and fourth quarters of 2020.
The church identified which employees were eligible for the credit based on IRS guidelines, including those who were furloughed due to COVID-19 restrictions.
Another example is a non-profit organization in California that avoided layoffs by utilizing the ERC credit. The organization had experienced a decline in gross receipts due to canceled events and decreased donations during the pandemic but continued operations as best they could with remote work arrangements.
These examples show that with careful consideration of eligibility criteria and proper identification advance payment of qualifying expenses, churches, and non-profits can take full advantage of this beneficial program designed specifically for them.
List of Common Religious Affiliations
Here is a comprehensive list of religious affiliations that might qualify:
- Christian
- Protestant
- White Evangelical
- White Mainline Protestant
- Black Protestant
- Hispanic Protestant
- Other non-white Protestant
- Catholic
- White Catholic
- Hispanic Catholic
- Other non-white Catholic
- Mormon
- Jehovah’s Witness
- Orthodox Christian
- Unaffiliated
- Non-Christian
- Jewish
- Muslim
- Buddhist
- Hindu
- Other non-Christian
List of Religious Populations Around The World
Here is a full list of religions that may qualify for the ERC credit:
- African traditional religions
- Animism
- Baháʼí
- Buddhism
- Cao Dai
- Chinese traditional religion Christianity
- Ethnic religions Hinduism
- Islam
- Jainism
- Judaism
- Neo-Paganism
- Rastafari
- Secular / Nonreligious / Agnostic / Atheist
- Shinto
- Sikhism
- Spiritism
- Tenrikyo
- Unitarian Universalism
- Zoroastrianism
Types of Places of Worship (Buildings and Structures)
Below is a list of buildings and structures where people go to worship:
- Eastern Orthodox Church
- Church
- Catholic Church
- Chapel
- Cathedral
- Mosque
- Tabernacle
- Basilica
- Synagogue
- Convent
- Stupa
- Bahá’í House of Worship
- Hindu Temple
- Shinto shrine
- Sanctuary
- Gurdwara
- Fire temple
- Jain temple
- Taoist temple
Conclusion and Summary: Employee Retention Credit For Churches And Places Of Worship
The Employee Retention Credit is an important resource that can help churches and places of worship continue to serve their communities during these challenging times by providing financial relief and enabling them to retain their employees.
Enabling Churches To Retain Employees And Continue Serving Their Communities During Challenging Times.
The Employee Retention Credit (ERC) is a critical lifeline for churches and places of worship during the COVID-19 pandemic. The credit provides financial relief to eligible employers, allowing them to retain employees and continue serving their communities during challenging times.
For example, by taking advantage of the ERC, a church can keep its staff on payroll and maintain operations like food banks or social programs that benefit people in need.
This means that churches are affiliated non-profit organizations that can continue to provide crucial services to individuals and families who are struggling due to the pandemic while avoiding layoffs or furloughs.
Employee Retention Tax Credit (ERC / ERTC) Help: Claim Up To a $26,000 Refund Per Employee for Your Church, Ministry, Clergy, or Place Of Worship Business
Disaster Loan Advisors™ can assist your business with the complex and confusing Employee Retention Credit (ERC) and Employee Retention Tax Credit (ERTC) program, without you having to pay an excessive percentage of your hard earned ERC refund.
DLA doesn’t charge a percent like many companies do. Our flat fee structure is fair and reasonable based on the amount of work involved. Keep More of Your Refund™
Depending on eligibility, business owners can receive up to $26,000 to $33,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.
The ERC / ERTC Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.
Schedule Your Free Employee Retention Credit Consultation to see what amount $ of employee retention tax credit your company qualifies for.
ERC Deadline Urgency in 2024
April 15, 2024 Deadline for the 2020 ERC Tax Year
The deadline is coming up for the final opportunity to retroactively claim your business Employee Retention Credit for the past 2020 tax year. With the April 15, 2024 deadline fast approaching, we urge you; don’t let this final chance pass!
While not all businesses will qualify, as it depends on multiple factors per IRS Rules and Guidelines, you might be leaving significant financial relief on the table from prior COVID impact to your business during the past 2020 and 2021 business operation years.
Last year, in September 2023, the IRS temporarily paused processing ERC Claims for the remainder of last year. We at Disaster Loan Advisors (DLA) predicted this over one year ago when we made this ERC video warning business owners. See the ten-minute mark of the video for details.
TAKE ACTION NOW IN 2024
Even though the IRS has temporarily paused processing, you will still want to check eligibility and file now (if you qualify) because once the IRS will resume processing, ERC tax credit claims are processed in the order they are received.
If you haven’t previously filed for the ERC Credit, it is worth scheduling a phone call to at least explore your possible eligibility from both the past 2020 and 2021 business tax years. Contact us today for a deep-dive analysis to determine if your business qualifies one or more quarters from the 2020 and / or 2021 tax years.
As a leading dedicated member of the Tax and Accounting Team at Disaster Loan Advisors™, Mark focuses on unlocking the ERC Tax Credit's potential for eligible firms that qualify, providing strategic advice, and detailed guidance to ensure substantial financial recovery and growth. His methodical approach to client engagement includes comprehensive deep-dive analysis, customized consultation and guidance, and a commitment to achieving tangible results for each business served.
Disaster Loan Advisors™ (DLA) offers a comprehensive suite of services designed to navigate the complexities of the Employee Retention Tax Credit (ERC) program, ensuring that qualified businesses leverage the maximum possible benefit with minimum hassle. Unlike some firms that charge exorbitant contingency or percentage-based fees (often between 10% to 30% of your ERC refund), DLA operates on a fair and reasonable, transparent flat-fee structure that aligns with the IRS's guidelines.
If you are looking for an ERC Company that believes in providing professional ERC Services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors™ is a good fit for you. STAY SAFE. STAY COMPLIANT. KEEP MORE OF YOUR REFUND.™
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