The Employee Retention Tax Credit (ERC) Explained

Understanding the requirements and eligibility of the ERC (Employee Retention Tax Credit) can be complicated – especially for houses of worship and nonprofits. Most recently, the policy was amended to enable organizations to qualify for ERC tax credits even if they received PPP loans. Here’s a helpful breakdown of the commonly asked questions regarding the Employee Retention Credit and how to go about claiming it. So far, Church & Casualty customers have claimed over $10 million in ERC funds thanks to our Advisory Team.

What is the Employee Retention Credit (ERC)?
The ERC was established under Coronavirus Aid, Relief and Economic Security Act (CARES Act) to encourage businesses impacted by COVID-19 to keep employees on payroll. The ERC is a tax credit that reduces payroll tax deposits paid quarterly on 940/941’s.

  • Tax Credit Amounts:
    2020: 50% of qualifying wages up to 10,000 per employee during the period March 13, 2020–Dec. 31, 2020
    2021: 70% of qualifying wages up to $10,000 per employee for EACH Q1, Q2, and Q3

When is the deadline to claim the ERC?

  • For the 2020 tax year, the deadline is April 15, 2024.
  • For the 2021 tax year, the deadline is April 15, 2025.

These relief programs are subject to change, therefore we recommend filing early to prevent any delays due to changes in ERC legislation.

Who is eligible?
Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business and have experienced either:
-full or partial suspension of operations due to governmental orders limiting commerce, travel, or group meetings due to COVID-19 or
-a significant decline in gross receipts in a calendar quarter in 2021 and/or 2020 vs. the same quarter in 2019.

What is the maximum potential claim amount?
If your organization qualifies for all quarters, and an employee has qualifying wages of $10,000 for 2020 and $10,000 for each of the first 3 quarters in 2021, your maximum ERC credit will be 26,000 per person.

What is considered qualified wages?
Qualifying Wages are those subject to Social Security Tax and the health insurance premiums paid in the period, up to $10,000 per person in 2020 and $10,000 per person per quarter in the first 3 quarters of 2021.

How do I claim the credit?
Eligible employers will report total qualified wages and the related health insurance costs by filing a Form 941 for the applicable quarters. The refund will come to the organization in a check from the US Treasury.

We’re here to help you navigate the process and determine if you’re eligible. Exclusive to CCIA Customers, our partners at Mesa Network are offering a free initial evaluation and a 25% discount on their service fees. Email to get started.