Nonprofit Owner’s Guide to the Employee Retention Credit

During the height of the COVID-19 pandemic, hundreds of thousands of for-profit and not-for-profit businesses were scrambling with finding innovative ways to stay open or having to shut their doors entirely with government orders. It was during this time that the Employee Retention Credit (ERC) was created in 2020 by the Coronavirus Aid, Relief and Economic Security Act (CARES). The ERC is a fully refundable tax credit filed against W-2 employment taxes. For many, it has helped keep their nonprofit business afloat during uncertain times.

But what many may not have realized is that the Employee Retention Credit wasn’t just intended for a traditional for-profit business. It was also created to help support nonprofit small businesses and recovery start-up businesses.

Unfortunately, many nonprofit small businesses that qualified for the Employee Retention Credit didn’t claim them against their payroll taxes in 2020 or 2021. But the good news is that funds are still available. We’re listing out the top five reasons why your nonprofit should apply for the ERC today and who you should turn to for getting started.

Most Nonprofit Businesses Could Qualify for ERC

If you’re in charge of a nonprofit, you’re probably wondering if the Employee Retention Credit is attainable. There’s good news — Not-for-profit, for-profit, and recovery startup businesses can all apply for an ERC. Tax-exempt organizations are eligible for the Employee Retention Credit because they are considered to be involved in a trade or business regarding the entirety of their operations.

Tax-exempt Nonprofit Small Businesses That Could Apply Include:

  • Private hospitals
  • Private schools
  • Museums
  • Libraries
  • Credit unions
  • Performing arts centers
  • Churches

For a Nonprofit to Qualify for ERC, It Must Meet One of the Following Qualifications:

  • The organization had to reduce hours or was temporarily or completely shut down because of a COVID-19 government order
  • There was a significant decrease in gross receipts in 2021 or 2020 when compared to the previous fiscal year
  • The organization was a recovery startup business, operational in 2021 quarter 3 or quarter
  • Nonprofit employers are eligible if they have at least one W-2 employee

If you can agree with any of the qualifications above and you haven’t applied yet, you could be missing out on valuable funds. And for the first bullet above especially, there’s a good chance that your nonprofit business falls into this category. Did you find yourself limiting payroll hours, hiring on additional employees for sanitation needs, or reducing services? Did you have to temporarily close the doors to your physical location or your entire nonprofit business?

If you’re not sure if your nonprofit business falls into this category, connect with one of our tax specialists and we can walk you though eligibility requirements. By seeking an ERC, you can help further your cause and reach more people in need in the coming months.

Your Nonprofit Could Receive Up to $26,000 Per Employee

In the United States, the nonprofit sector employs 24 million Americans; That’s about 14 percent of the workforce. With an average of about half of nonprofit businesses employing at least one full-time W-2 employee, the odds are pretty good that you could already be eligible for an Employee Retention Credit. How so? In order to qualify for the Employee Retention Credit, you’ll need at least one full-time W-2 employee.

In 2020 and 2021, If your nonprofit employed at least one full-time employee, you may very well be able to take advantage of the ERC credit. But you may be wondering, “How much exactly are we talking here?” How does up to $26,000 per employee sound? For nonprofits especially, every penny counts. Every supply and resource is stretched to its limit so that the mission can continue to impact more individuals in the community. But if you had a check sent to your business for $26k, $52k, or even more, think about how much burden that could take off your shoulders.

If you’re ready to take that next step, get in touch with our team of tax specialists. We’ll help guide you along every step while handling all the heavy lifting for you. We pride ourselves in our complete tax credit filing solutions – having everyone and everything you need to provide you with the best experience, highest return, and compliance-focused process. After all, we know that as a nonprofit, you’re never not juggling multiple plates.

You Can Retroactively Apply for the ERC

Are you concerned because you missed the window? After all, you flipped the calendar on 2021 long ago. But did you know that you can retroactively still claim the Employee Retention Credit for up to three years?

If your business has experienced a significant impact due to COVID-19 between March 12, 2020, and September 30, 2021 (or December 31, 2022, for employers who qualify as a nonprofit recovery start-up business), you can go back and claim ERC for paid qualified wages for past calendar years with Form 941 or Form 941-X.

And while you have three years from your original filing deadline to claim the credit retroactively, you don’t want to wait any longer. Get started filing for an ERC today and you’ll be well on your way to putting funds you deserve back into your business.

It’s Easier Than You Think

Stenson Tamaddon allows nonprofit business owners like you to unlock the full potential of economic relief programs and specialized tax incentives, including the Employee Retention Credit.

We believe in a professional, accelerated approach to tax solutions for businesses and stand on our hassle-free promise to customers that their ERC filing will always be compliance-driven and accessible. Using proprietary technology, our U.S.-based ERC team provides experience and services that are second to none while focusing on fully maximizing your return. With offices from New York, New York, to Phoenix, Arizona, we exist to deliver optimal results for your ERC filing with minimal disruption to your business.

Talk with one of our tax credit specialists today to learn more about how you can get the money you deserve!

Latest Posts

Related Posts

Interested in learning about your eligible tax credits?
Fill out the form to receive a complimentary consultation and personalized quote from StenTam.

Discover how Cost Segregation can maximize your tax benefits and increase cash flow for your real estate investments.

Fill in the form to begin.