How Nonprofit Groups Can Claim the ERTC in 2022

What Is the ERTC?

The Employee Retention Tax Credit (ERTC) was a temporary relief measure designed to help businesses and nonprofits impacted by the economic disruption caused by the COVID-19 pandemic. During this time, many organizations experienced shutdowns, reduced operations, and significant revenue declines, making it difficult to retain employees.

The ERTC provided a refundable payroll tax credit for qualified wages paid to employees during eligible periods in 2020 and 2021. Depending on the year, eligible employers could receive a credit of up to 50 percent of qualified wages in 2020 and up to 70 percent in 2021, making it a valuable source of financial relief.

While the program officially ended for most employers on September 30, 2021, organizations may still be eligible to claim the credit retroactively. Businesses and nonprofits can file amended payroll tax returns to claim refunds for eligible quarters, generally within three years of the original filing date.

This blog outlines how the ERTC applies to nonprofit organizations, explains eligibility requirements, and highlights what steps organizations can take to determine qualification and claim any remaining credits. To check out the updated requirements, check in with the IRS ERTC here.

The ERTC and Nonprofit Groups

The ERTC helped businesses and nonprofits retain employees during the pandemic by providing a refundable payroll tax credit based on qualified wages. Because it was tied to payroll taxes, both nonprofit and for-profit organizations were eligible to participate.

While the credit is no longer available for current wages, many organizations did not claim it when it was originally offered in 2020 and 2021. These businesses and nonprofits may still be able to claim the ERTC retroactively by filing amended payroll tax returns.

However, eligibility rules evolved throughout the program, leading to confusion about qualification and potential refund amounts. Check with the IRS for deadlines to file Form 941 X. These may be important for organizations to evaluate their eligibility as soon as possible.

Before filing, organizations must first determine whether they qualify for the credit. Here is a brief overview of how nonprofit groups can assess their eligibility.

Do I Qualify for the ERTC in 2022?

The guidelines are different for claiming the ERTC in 2020 (for wages paid from March 13 through December 31, 2020) and 2021 (for wages paid between January 1 through September 30, 2021).

For the 2020 period, there are two ways to qualify:

Employers whose operations were fully or partially suspended due to emergency orders from a government authority

Employers with at least a 50% reduction in gross receipts for a given calendar quarter (compared with the same quarter in 2019)

For the 2021 period, there are also two ways to qualify:

Employers whose operations were fully or partially suspended due to emergency orders from a government authority

Employers with at least a 20% reduction in gross receipts for a given calendar quarter (again, compared with the same quarter in 2019) may be eligible

What Wages Qualify for the ERTC?

The guidelines are also different for knowing which wages qualify for the ERTC in 2022.

For 2020:

Those with 100 or fewer full-time employees may be eligible to claim the credit on wages paid to all employees.
For employers with more than 100 employees, the credit applies only to wages paid to employees when they were not providing services.

For 2021:

Those with 500 or fewer full-time employees may be eligible to claim the credit for wages paid to all employees.
For employers with more than 500 employees, the credit applies to those not providing services.

How Can I Claim the Employee Retention Credit Retroactively?

If your organization filed its quarterly Form 941 with the IRS between March 2020 and January 2021, you already claimed the ERTC. Employers who didn’t claim this credit in either of those years can still claim the ERTC in 2022 by filing an amended 941, Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return, or Claim for Refund.

Form 941-X must be filed within three years of the date the original return was filed or two years from the date the payroll tax was paid. Once the amended payroll tax form is processed by the IRS, it will issue a refund to the address on file.

It’s important to note that some businesses and nonprofits have reported that they haven’t received ERTC payments. With some reported delays lasting a year or more, it’s clear to see that even the IRS isn’t immune to workforce shortages.

How Much of the Credit Can I Claim?

For 2020, the credit equals 50% of qualified wages, including qualified health plan expenses, up to $10,000, or a maximum credit of $5,000 per eligible employee for the year.

For 2021, the credit equals 70% of up to $10,000 of wages (and qualified health plan expenses) per calendar quarter or a maximum credit of $21,000 per eligible employee for the first three quarters of 2021.

Not Sure Where To Start? Rubino Can Help

Most small business owners and nonprofit directors are too busy growing their organizations to handle every little tax issue, even if it means enormous benefits like the ERTC. This is why it’s important to partner with a seasoned tax professional. They plan taxes around your operations, relieving the tax burden on your organization and making sure you take advantage of every tax benefit.

The ERTC is a confusing process due to the complexity of the requirements, and now that the initial claim periods have passed, the road to getting the most out of the credit has become even more complicated.

Your partnership with Rubino changes all of that. We make payroll and tax planning, and Form 990 prep easy, and with dedicated tax experts on staff, there are no problems we can’t solve.

Contact us today for a free consultation!