by Stephen Boersma, Ph.D.
The Internal Revenue Service (IRS) is urging employers (including qualifying nonprofit organizations, to take advantage of the newly extended employer retention credit (ERC) designed to help businesses manage the challenges posed by COVID-19. The credit is specifically targeted toward employers who choose to keep their employees on the payroll.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTRA 2020), enacted on December 27, 2020 extended the tax credits previously made available under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) with some modifications through the first six (6) months of 2021.
As a result of the new legislation eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2021. The maximum ERC amount available per employee per calendar quarter is $7,000, for a total of $14,000 for 2021. (One VCN church recently filed for the credit for the 1st quarter of 2021 and discovered they qualified for a tax credit of almost $70,000! Likely, they will qualify for roughly the same amount of credits for the 2nd quarter of 2021 making their total employment cost savings close to $140,000.)
Employers are eligible for the credit if they operate a trade or business (a church meets the definition of a trade or business for purposes of this credit) during January 1 and June 30, 2021 and experiences either:
- full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- A decline in gross receipts in the calendar quarter in 2021 where gross receipts in the quarter are less than 80% of the gross receipts in the same calendar quarter in 2019.
There are a few other changes to such things as the definition of wages and the periods that can be used to determine if you qualify, but essentially this is it.
If you think your church might even remotely qualify for this credit, we would encourage you to look into this further. If you make use of an outside payroll service, they would be an excellent place to begin your investigation as they likely would be able to prepare and file the required forms on your behalf. For those of you who prepare your own payroll and payroll filings and who need assistance I recommend contacting your local CPA, legal, or tax advisor to determine whether you are eligible for the ERC and for filing assistance.
April 19, 2021
(About the Author: Stephen Boersma, Ph.D. currently serves as the chief financial officer for the Northern California & Nevada region of Venture Church Network. Prior to joining the Association’s staff in a part-time role Steve was a long-time tax and compliance consultant specializing in assisting churches and faith-based organizations on all things related to the business side of ministry).