What is the Employee Retention Tax Credit?
The Employee Retention Tax Credit (ERC) is a refundable payroll tax credit available through the CARES Act to businesses impacted by COVID-19. The intent is to reward employers for retaining their employees.
On December 27, 2020, the President signed a $900 billion COVID-19 relief package into law that includes additional relief for businesses. Specifically, the new legislation amends, expands, and enhances the CARES Act Employee Retention Credit (ERC). Then in March 2021, the President signed another bill extending CARES Act ERC until the end of calendar year 2021.
The new legislation explicitly provides a retroactive amendment to March 13, 2020, and clarifies these businesses are now eligible to receive the ERC—just not on wages paid with PPP loan funds. The credit is capped at $26,000 per employee. We suggest you familiarize yourself for all IRS updates here.
What type of entities are eligible?
Small businesses as defined by SBA size standards (in this case a minimum of 25 employees) are eligible to apply. This includes all churches, ministries, Christian schools and other entities that are registered as a 501(c)(3), 501(c)(6), or 501(c)(16) organization. In addition, for profit entities including independent contractors, sole proprietors, Limited Liability Companies, S-Corporations, and C-corporations may apply.
Small employers are categorized as: less than 100 employees 2020 (which counts the 2019 average employee) or less than 500 in 2021.
Bigger employers are categorized as: over 100 in 2020 or over 500 in 2021.
Book A Call
Pick a time and date. A Relationship Manager will cover the ERC basics, evaluate your situation and advise your next best steps.
Who Can Apply
Eligible entities, that together with their affiliates (if applicable), have a minimum of 25 employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—can apply. Previous Paycheck Protection Program loan recipients are eligible to apply for an ERC. To learn more, visit the IRS.
Process to Apply for an ERC with ACCU
Step 1: Book a call with us to understand your organization’s situation, provide you the most updated government orders, look at your payroll and documents to see if you are eligible, and lay out the next best steps for your organization.
Step 2: An analysis of your organization’s payroll will be conducted to ensure audit defense and identify ways to maximize your credit.
Step 3: You’ll be given a customized audit ready package laying out all the areas to maximize your credit while guaranteeing compliance and audit defense. Your CPA or Tax Accountant will submit your paperwork to the IRS to receive your credit.1
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Why is the ERC important to my business?
You may be eligible to receive a tax credit up to $26,000 per employee. These are refundable payroll tax credits that can greatly impact your company’s bottom line. In late December of 2020, Congress revised relief options available to businesses affected by the pandemic, including refundable credits for retaining employees in both 2020 and 2021.
This expansion of the CARES Act Employee Retention Credit (ERC) creates opportunities for previously excluded recipients of PPP. In March 2021, the stimulus package extended the credits for another six months making employers eligible through December 31, 2021.
How does my organization qualify for ERC?
- To be eligible, your organization or business must have at least 25 employees.
- Operations must have been fully or partially suspended by government orders OR experienced a reduction in revenue or year over year gross receipts of 50% in 2020 or 20% in 2021.
- Fully or partially suspended operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19 (includes working from home).
What if my organization does not qualify for ERC during our consultation – will I have to pay a fee?
No, this is contingent on your success to qualify. You pay the fee once your audit package has been provided to you. The consultation is to guide you and indicate whether this service applies and will benefit your organization and employees. So your success is our success.
Who would not qualify for an ERC?
An organization would not qualify if paychecks are issued by the state or federal government. Example: A non-profit that provides food and housing assistance, and their employees’ checks are from the federal government.
Do I need to be a member of America’s Christian Credit Union?
No, ACCU membership is not required to receive this service from us.
Took advantage of the PPP already?
Retroactive to the effective date included in the CARES Act, the 2020 provision:
- Provides that employers who received Paycheck Protection Program (PPP) loans now qualify for the ERC with respect to wages that are not paid for with PPP proceeds;
- Clarifies the determination of gross receipts for certain tax-exempt organizations; and
- Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance.
What is the breakdown for obtaining an ERC?
2021: Depending on the employee’s salary, it is either 70% of employee wages or up to $10k per person per quarter.
2020: Depending on the employee’s salary, it is either 50% of employee wages or up to $10k per person per quarter for the year.
The size of your organization matters as it affects the analysis and its process of obtaining an ERC.
Small organizations are categorized as:
- 2021: less than 500 employees
- 2020: less than 100 employees (which takes into the 2019 average employee count)
Bigger organizations are categorized as:
- 2021: over 500 employees
- 2020: over 100 employees
For additional FAQ’s, please visit the IRS’ website
Do Private Colleges and Universities Qualify for the Credit?
Any employer, regardless of size, is eligible for the credit during calendar year 2020 & 2021 if the business: (1) is fully or partially suspended due to a governmental order related to COVID-19, or (2) experiences a 50% decline in gross receipts for 2020 or a 20% decline in gross receipts for 2021. The credit also applies to tax-exempt organizations if the operation of the organization is fully or partially suspended due to the circumstances described in (1) above. The credit generally does not apply to governmental employers, including the U.S. Government, state and local governments, or any agency of the foregoing. PPP recipients are also eligible to receive the ERC—just not on wages paid with PPP loan funds.
Below are a few example case studies of colleges and universities that have received the ERC:
Private Indiana University
- 750 Employees
- Estimated Credit Total: $1,000,000
Private Midwest University
- 1,000 Employees
- Estimated Credit Total: $1,600,000
Private Christian College
- 70 Employees
- Estimated Credit Total: $2,100,000
Private Christian University
- 450 Employees
- Estimated Credit Total: $6,000,000
“We did not think that we were qualified for the Employee Retention Tax Credit. This credit allowed us to invest more into technologies for remote learning.”
“We were able to not only maximize our credits, but we were given peace of mind through the team’s consistent, proven, and dependable methods.”
“A colleague recommended us to apply, and we are sure glad that they did. The team was professional, thorough, and knowledgeable.”
“Due to so many different circumstances – we didn’t think we qualified for the ERC. With the team’s expertise, we were able to maximize our credits.”
1 – Receiving your ERC is determined by the final analysis and approval of the IRS. A contingency fee will be due when an audit package is provided to help your CPA or Tax Account file your ERC.