EMPLOYEE RETENTION CREDIT

 

    It has been some time since I have done a blog entry, for which I apologize. Unfortunately, life (and health) got in the way. The good news is that with surgery and upcoming radiation, my cancer will be taken care of.

    I wanted to make a blog entry, however, about Employee Retention Credits. That is because I am sure you are receiving phone calls from people/companies that are promising that they can help you apply for these credits and you can receive “$28,000 per employee). While that could be true, the amount is most likely inflated because that is the maximum credit and assumes that every employee was making at least $10,000 per year during 2020 and $40,000 per year during 2021. In churches, that is usually not the case. This companies also charge a substantial amount of money to prepare the necessary paperwork for the claim.

    I have done a few of them for churches, and, while it takes some work and computations and spreadsheets, it isn’t horribly difficult. Essentially, quarterly payroll per employee has to be computed for the second, third and fourth quarters of 2020 and the first and second quarters of 2021. Then the maximum “qualified wages” have to be computed per employee per quarter, and then the maximum credit applied per employee per quarter. Once those computations are done, then amended quarterly payroll forms have to be prepared, applying for the credit.

    There are two “reasons” for this credit to be allowed. The employer church:

(a  (a)  were affected by government orders imposing capacity restrictions on services and other gatherings; or

(b   (b) suffered significant declines in gross receipts.

    While many employers have some familiarity with the ERC, confusion exists around the qualifications and application processes.

    Because our churches were closed or had to have reduced attendance, they can qualify for this credit even though many of our churches did not experience significant declines in gross receipts, thanks to the generosity of our people!

    The maximum credit is essentially $5,000 per employee for 2020.

    The maximum credit is $7,000 per employee per quarter for the first and second quarters of 2021.

    There are credits available for the third and fourth quarters of 2021, but there are additional requirements to qualify. Reported on Form 941-X for Quarter 2

    Tax exempt organizations that experience fully or partially suspended operations due to orders from an appropriate governmental authority to limit commerce, travel, or group meetings due to COVID-19 can qualify as Eligible Employers for purposes of the ERC. The period that the employer pays qualified wages lasts as long as the government mandates are in effect.

    If you wish more information on this credit and the steps needed to apply for it, please feel free to contact me at (315) 427-3668 or sranousacctg@twcny.rr.com. I’d be happy to answer questions, or help you with the application.