In the latest round of COVID legislation, the ERTC was made available to more businesses, including churches. The ERTC is a tax credit that’s rewards are two-fold: rewarding employers who have retained employees during COVID and thus providing cash to continue providing these jobs.
But churches do not pay taxes, how can they get a refund from the IRS?
Although churches are exempt from paying income tax, most churches do submit and pay in for payroll taxes. The ERTC is a credit against the Social Security taxes withheld by employers, including those taxes withheld by churches.
What is the big deal with the ERTC?
Some of the biggest COVID funds from the Federal Government are now available for churches that qualify.
For example:
A church paying $40K-$50K per quarter in total wages that are at least 30% non-clergy has the potential for a ERTC refund of at least $5,000.
Between the 2020 and 2021 tax years, a church with 10 qualified employees has the potential for a refund exceeding $100,000.
Does Your Church Qualify?
ERTC Qualifications:
There are two separate recoveries available.
A retroactive recovery for 2020 tax payments to the IRS. Eligible churches qualify by either meeting the requirements of a “Government Shut Down” OR having experienced a drop in gross receipts by 50% or more between a 2020 quarter compared to the same quarter in 2019.
A contemporaneous recovery for 2021. This recovery has the potential to provide substantial refunds. Like the 2020 recovery, eligible churches qualify by either meeting the requirements of a “Government Shut Down” OR by experiencing a drop in gross receipts by 20% or more. 2021 contemporaneous recoveries can use either the quarter being claimed compared to 2019 OR the previous quarter compared to 2019.
Governmental orders that count as a Government Shut Down can include but are not limited to:
An order from the city's mayor stating that all non-essential businesses must close for a specified period;
A State's emergency proclamation that residents must shelter in place for a specified period, other than residents who are employed by an essential business and who may travel to and work at the workplace location;
An order from a local official imposing a curfew on residents that impacts the operating hours of a trade or business for a specified period; or
An order from a local health department mandating a workplace closure for cleaning and disinfecting.
As with any decision the church makes financially, if the church decides to move forward with the ERTC, Wisdom recommends keeping record of the deciding factors on the church’s eligibility.
The ERTC calculations are very involved. At the core, the calculations are made up of:
50% of qualified wages capped at $10k per employee for the full year of 2020.
70% of qualified wages capped at $10k per employee per quarter for 2021.
These calculations mean that for 2020 the max credit is $5,000 per qualified employee for the year and for 2021 the max credit is $7,000 per employee PER QUARTER, or $28,000 per employee for the full year.
Wisdom has already done many of these credit evaluations and corrections for US churches, and we don’t want you to miss out!
Wisdom is equipped to evaluate the benefit of the ERTC, calculate the possible credits available, and make the form corrections to help your church obtain the funds you have are due through the ERTC.