The Employee Retention Tax Credit (ERTC) is a tax credit available to eligible employers who retain their employees and continue to pay them during the COVID-19 pandemic. This credit is available to employers regardless of their industry, including churches and other religious organizations.
To be eligible, the organization must have been carrying on a trade or business during 2020, and must have experienced either a full or partial suspension of operations due to government orders related to COVID-19, or a significant decline in gross receipts.
Additionally, the organization must have retained its employees and continued to pay them at least partially.
The ERTC provides eligible employers with a refundable tax credit for up to 50% of wages paid from March 13, 2020-January 1, 2021. Qualified wages include both those paid to laid-off employees and those kept on the payroll during operations suspension. The amount of the credit is based on wages paid to each employee, up to $10,000 per employee for an aggregate of $5,000 per employee (for all eligible quarters). The maximum credit potential for an employer is $7,000 per employee over the entire period.
The funds received through this program can be used to offset any expenses incurred by the organization due to COVID-19 or other related economic disruption such as payroll costs, rent payments or other overhead expenses. Additionally, the funds can be used to help an organization’s employees by reimbursing them for certain qualified expenses such as filling gaps in health insurance coverage or providing financial assistance during periods of hardship.
Finally, any unused portion of the credit can be carried forward and used against future payroll taxes up to 2026. The ERTC is a valuable resource for businesses looking to offset the impacts of COVID-19, and is available only through early 2021. Eligible employers should take advantage of this program if they have not already done so, and consider how best to use the funds received.