As churches and religious organizations continue to navigate the challenges of the COVID-19 pandemic, many are facing financial strain due to changes in giving patterns, lower attendance, and increased costs for safety measures. However, one valuable but often overlooked tool for financial relief is the employee retention credit (ERC) provided by the federal government.
The ERC was first introduced as part of the CARES Act in 2020 and has since been expanded and extended through various legislative measures. This credit is designed to encourage businesses, including tax-exempt organizations such as churches, to retain their employees during times of economic uncertainty.
So, how can churches take advantage of this valuable resource? The first step is to understand the eligibility criteria. To qualify for the ERC, an organization must have experienced a significant decline in gross receipts or have been partially or fully suspended due to a government order related to COVID-19. Since many churches have faced reduced giving and attendance, they may meet these requirements.
Once eligibility is established, churches can claim the credit on their quarterly employment tax returns or request an advance payment from the IRS. The credit is equal to a percentage of qualified wages paid to employees, up to a certain limit per employee.
For organizations with fewer than 500 employees, the credit is available for wages paid from March 13, 2020, through December 31, 2021. This means that churches can retroactively claim the credit for previous quarters as well as for wages paid in 2021. Additionally, the eligibility criteria have been expanded to allow churches that received Paycheck Protection Program (PPP) loans to also claim the ERC, providing an additional source of financial relief.
It’s important to note that the ERC is a refundable tax credit, meaning that churches can receive the full value of the credit even if they have no federal income tax liability. This makes the ERC an especially valuable resource for tax-exempt organizations.
By leveraging the employee retention credit, churches can not only provide financial relief for their organizations but also ensure the retention of their valuable staff members. This credit can be used to cover a variety of costs, including salaries, benefits, and training expenses, helping churches to maintain a strong and stable workforce.
In conclusion, the employee retention credit is a powerful tool that can provide much-needed financial support for churches and religious organizations during this challenging time. By understanding the eligibility criteria and taking advantage of this valuable resource, churches can demonstrate good stewardship of their resources and continue to fulfill their mission and ministry in the community. It’s important for church leaders to familiarize themselves with the details of the ERC and explore how it can benefit their organization.