Non-Profit Employee Retention Credit Eligibility

Published On: April 14th, 2022Categories: CARES Act, Not-for-Profits, Paycheck Protection Program, PPP Forgiveness, Small Business

Did you know that non-profits are eligible for the Employee Retention Credit (ERC)? It is not too late to consider your options.

The ERC was originally enacted by the CARES ACT on March 27, 2020, but changes expanded the credit and more employers were eligible. The ERC allows eligible employers to obtain a refundable credit of up to $5,000 per employee per quarter on qualified wages in 2020 and is available to both businesses (including non-profits) that received PPP funds and those that did not.

Eligibility
To be eligible for the ERC, one of the following situations must apply:

The employer’s trade or business operation was fully or partially suspended during a calendar quarter in 2020 under orders from an appropriate governmental authority.
The employer experienced a 50% decline in gross receipts in any quarter in 2020 compared to the same calendar quarter in 2019. The credit can be claimed for each subsequent quarter until the quarter after gross receipts declined no more than 20% compared to the same quarter in 2019.

2021 Extension
The ERC was subsequently extended through September 30, 2021, and eligible employers can now claim a credit of up to $7,000 per employee per quarter. To be eligible for the ERC in 2021, one of the following situations must apply:

The operation of the employer’s trade or business was fully or partially suspended during a calendar quarter in 2021 under orders from an appropriate governmental authority.
The employer experienced a 20% decline in gross receipts in any quarter in 2021 compared to the same calendar quarter in 2019.

Qualified Wages
Qualified wages for the 2020 ERC are based on the business’s average number of full-time employees in 2019.

Small employers, those that had 100 or fewer employees, may receive the credit for wages paid to employees whether or not they were providing services to the employer during the period.
Large employers, those that had more than 100 employees, may receive the credit for wages paid to employees for time the employees who were not providing services to the employer.
Wages used for PPP forgiveness are not eligible for ERC.

Qualified wages are the same for the 2021 ERC, except small employers are now considered 500 or fewer employees.

If you believe you are eligible for the ERC based on the above criteria, please contact us, and we would be happy to assist you in the calculations to determine your credit amount.

About the Author: Amanda Ryan, CPA

Amanda assists her clients in a wide array of duties, including income tax return preparation, tax planning, accounting services, and compilation preparation. Her secret to working through the various challenges? Patience to always seek out the right answer and understand the situation. “It’s very satisfying when I’m able to assist someone and be a positive part of their day,” the Harvard, Illinois native says. “At our firm, we are proud of our great attention to detail, treating clients as we would want to be treated.”