Your organization may be eligible to receive up to $26,000 per employee through the Employee Retention Credit (ERC), even if you also received a forgivable Paycheck Protection Program loan. The Minnesota Council of Nonprofits (MCN) believes many MN nonprofit employers are eligible for this credit, and the credit could bring hundreds of thousands of much-needed relief dollars to the nonprofit sector.
MCN is seeking to better understand what barriers nonprofits may be facing in accessing the ERC and is working to expand access for eligible groups. Please complete this brief form to share with us.
- What is the ERC? The ERC is a refundable tax credit created in March 2020 under the CARES Act to encourage employers to keep their employees on payroll during the height of the coronavirus pandemic. The ERC provides an eligible employer with a tax credit allowed against certain employment tax payments paid between March 13, 2020 through September 30, 2021.
- Who is eligible? Eligible employers are businesses, including nonprofits, whose operations were fully or partially suspended due to governmental orders in response to COVID-19 OR that had a significant decline in gross receipts compared to 2019. Since nonprofits are “tax exempt,” you may not think of your organization as being eligible to receive a tax credit. Well, nonprofits with paid employees do pay some taxes! Nonprofit employers submit Form 941 to the IRS quarterly for the purpose of reporting income taxes, Social Security tax, or Medicare tax withheld from employees’ paychecks and to pay the employer’s portion of Social Security or Medicare tax. If you use a third party administrator to process payroll, chances are they prepare your 941s automatically each quarter.
- How do I claim the credit? Employers claim the ERC on the Form 941 filed with the IRS for each quarter for which they are eligible. If you did not claim the ERC on your originally filed Form 941, you can claim the credit retroactively by filing Form 941-X (as an amended filing).
If you suspect your organization may be eligible, consult with your accounting or tax professionals as well as payroll services that are familiar with the credit on next steps for submitting amended filings to the IRS. There are several independent firms who are specializing in processing the amended employment tax filings for businesses, though nonprofits beware! Many of them charge a percent of the anticipated credit as a fee ranging from 7.5% to as a high as 20% and often require payment before the credit has been received.
- When is the deadline? It depends. Form 941-X generally must be filed within three years from the date the original return was filed, or two years from the date the payroll taxes were paid.
For more information, read this article by the National Council of Nonprofits: https://www.councilofnonprofits.org/thought-leadership/attention-nonprofit-employers-did-you-forget-claim-refundable-tax-credits-the-irs