The federal government provided various types of financial assistance to struggling businesses throughout the pandemic. However, if you belong to a church or nonprofit group, you might not have considered that your organization qualifies. Luckily, nonprofit organizations and churches are eligible, so your company might still be able to benefit from Employee Retention Credits (ERC), but you need to move soon!
The ERC is a payroll tax credit. Because all organizations, for-profit or not, have payroll, adding credit to payroll taxes was a straightforward method to include 501(c)(3) businesses in this stimulus. On December 27, 2020, the ERC was revised to make it possible for companies that had signed up for the Paycheck Protection Program (PPP) to also benefit from the Employee Retention Credit. Numerous businesses, including charity organizations, have now benefited from the PPP and the ERC as a result of this change.
How does a nonprofit organization or church qualify for ERC?
- Government Order
For the purposes of the ERC, tax-exempt organizations that had their operations completely or partially suspended as a result of orders from the government restricting commerce, travel, or group gatherings because of COVID-19 are considered to be qualifying employers.
Even if it is not the only way to qualify, it can be a major factor for some organizations if the government restricted group meetings.
- Gross Receipts Test
As a qualification test, the Gross Receipts Test is often used in sectors other than nonprofits. The ERC Gross Receipts Test for 2021 analyzes how much the organization’s gross receipts declined from the same calendar quarter in 2019. The company has a good chance of being accepted into the 2021 ERC if there is a drop of more than 20%.
Aside from the necessary decrease, the Gross Receipts test for 2020 is essentially the same. The organization has a good possibility of being eligible for the 2020 ERC if gross receipts decline by more than 50%.
Maybe a government-ordered shutdown had no impact on your nonprofit. Even so, there is a chance that attendance or donations were still down, and the resulting decline in revenue would make the gross receipts test a plausible option for determining qualifiers.
Have any questions? Our support team is here to help you with any questions or issues you might have. We take care of the hard work, so you never have to worry about it! Our team of professionals works to ensure that your company receives the full ERC credit it is entitled to. Contact us to find out more about ERC credits and how we can assist you.