Nonprofit organizations are eligible to receive employee retention credits. Nonprofit organizations are eligible for employee retention credits (ERC). Learn more about this payroll tax credit to see if your organization might be eligible. Nonprofit organizations can be considered employers eligible for the CARES Act (ERC).
TEOs generally do not qualify for federal tax credits; however, the CARES Act (ERC) presents a unique opportunity for organizations to receive tax credits. This is a unique opportunity because the ERC, which is refundable, is deducted from payroll taxes. The ERC reduces liability for payroll taxes reported on IRS Form 941, the employer's quarterly federal tax return. If you previously received a PPP loan and have already applied for that loan to be forgiven, none of the salary involved in that transaction is eligible for the ERC.
Because most eligible employers opted for a PPP loan instead of applying for the ERC, this aid credit generally went unnoticed by many eligible employers. ERC specialists working for accounting firms, accounting departments and tax preparers can quickly assess whether a non-profit organization is entitled to credit and provide the necessary guidance. The Employee Retention Credit (ERC) was one of the government's tax incentives approved to encourage eligible employers to continue paying employees and keep their businesses running during the economic consequences of the coronavirus. The ERC is a federal credit that applies to a company's quarterly payroll taxes, not to company taxes, based on the number of full-time employees (more than 30 hours) the company had during the eligibility period.
What many don't know is that this financial aid was intended for any employer with employees, including tax-exempt non-profit organizations, such as private hospitals, museums, churches, private schools, universities and credit unions. Organizations were affected by COVID in many different ways, especially non-profit organizations and the ERC can serve as lifesavers for them. Dennis is actively volunteering with the North Carolina Association of Certified Public Accountants, the Guilford Nonprofit Consortium, and the accounting assistance program of the North Carolina Center for Nonprofit Organizations. Many leaders of non-profit organizations are unaware of the ERC and its possible eligibility, and it's important to note that there is still time to apply for the ERC.
To avoid a mass unemployment crisis and provide assistance to employers, the federal government included an employee retention tax credit (ERC) in the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), as part of the request for forgiveness to better ensure that the ERC receives the maximum qualified salaries.