As a nonprofit organization, it's important to keep your finances in order so that you can continue to serve your community. One way to do this is by taking advantage of the Employee Retention Credit (ERC) offered by the IRS. In this guide, we'll explain what the ERC is, who is eligible to claim it, and how to do so.
The Employee Retention Credit is a tax credit that was established as part of the CARES Act in response to the COVID-19 pandemic. It's designed to help employers keep their employees on payroll during difficult economic times. Eligible employers can claim a credit against their Social Security taxes for a portion of the wages they pay to employees during certain periods.
To be eligible for the ERC, a nonprofit organization must meet certain criteria. First, the organization must have been fully or partially suspended by government order due to COVID-19 during the calendar quarter. Second, the organization's gross receipts must be less than a certain amount. For 2021, the threshold is $1,000,000 for the first two quarters of the year, and $1,500,000 for the third and fourth quarters.
To claim the ERC, a nonprofit organization will need to file Form 941, Employer's Quarterly Federal Tax Return, for each quarter in which they are claiming the credit. On the form, the organization will need to provide information about the number of employees and the wages paid during the quarter. They will also need to provide documentation to prove that they were fully or partially suspended by government order.
Employee Retention Credit for Nonprofits