I’ve written extensively about the level of relief the Employee Retention Tax Credit (ERTC) program can provide to businesses. And while the focus of this program fell primarily on businesses, the benefits also extend to non-profits whose operations were impacted by the pandemic.
The pandemic has had a profound effect on non-profits, with charities facing significant challenges both in funding and operations. With many individuals and businesses facing financial challenges of their own, non-profits saw a 75% decrease in donations. And while trying to grapple with the dramatic drop, demand for services increased by 35%.
So, how do charities continue to provide the crucial services communities need?
The CARES Act created the ERTC to incent organizations to keep employees on their payroll during the COVID-19 pandemic. While that includes non-profits, there are special rules that apply. Here’s what you need to know as a non-profit employer.
To be eligible for the ERTC, your organization must have experienced a full or partial shutdown due to COVID-19 or had a significant decline in gross receipts. For charities, that means all revenue from donations, grants, program service fees, investment income, and other sources.
How much is the credit?
For 2020, the ERTC provides a 50% credit on wages paid to employees between March 12, 2020, and December 31, 2020, up to $10,000. That means you could claim a $5,000 credit for each person you employed in 2020.
For 2021, the ERTC provides a 70% credit on wages paid to employees between January 1, 2021, through September 30, 2021, up to $10,000. So, you can claim a $7,000 credit for each person you employed in the first three quarters of 2021, with a maximum credit of $21,000 per employee.
How is the ERTC claimed?
Employers must file IRS Form 941X in order to amend returns corresponding to the quarters in which the eligible wages were paid.
The Employee Retention Tax Credit has provided much-needed financial help to countless non-profits adversely impacted by the pandemic. Miami CFO can help you complete the process from beginning to end. Let’s set a time to go over how the ERTC impacts you, and collect the information we need to get your relief.