What Is the ERTC?

The Employee Retention Tax Credit (ERTC) is a temporary credit that was set up to alleviate the tax burden for businesses affected by the economic struggles caused by the COVID-19 pandemic. Businesses across the United States faced forced closures and revenue loss because many consumers had to stay home. And even when pandemic regulations eased a little bit and the economy began to rebuild, businesses found themselves needing to reduce their workforces in order to stay in business.

The ERTC offers a refundable tax credit equivalent to 50% of qualified wages paid to employees by a qualified employer from March 12, 2020, to January 1, 2021. Eligible employers could get instant access to the maximum credit by decreasing their employment tax contributions.

Although the ERTC was canceled at the end of September 2021, there is still time for businesses and nonprofits to claim the refundable ERTC in 2022, and it can offset employment taxes and generate a refund.

This blog will discuss how the ERTC applies to nonprofit organizations, how ERTC eligibility works, how Rubino can help you determine if you are eligible, and what you can do to claim the ERTC in 2022.

The ERTC and Nonprofit Groups

The ERTC allowed businesses to keep people employed throughout the pandemic, and because it was a payroll tax, it was available for both nonprofit and for-profit businesses. Some nonprofits didn’t take advantage of the ERTC when it was initially offered in 2021, but they can still get the ERTC in 2022. Sadly, many still don’t know whether they can qualify for the ERTC because eligibility and recoverable amounts have changed significantly over time.

Despite these issues, large amounts of unclaimed credits are available, and time is quickly running out for nonprofit groups to file a Form 941-X to claim the ERTC in 2022.

But first, an organization needs to know their ERTC eligibility. Here’s a brief explanation of how nonprofit groups can see if they qualify.

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

OR

  • 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

OR

  • 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, they 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.

Call us today for a free consultation!

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