How Churches Can Benefit from the Employee Retention Credit: Explained

The COVID-19 pandemic has left many organizations struggling to stay afloat, and unfortunately, churches are no exception. As the financial strain of the pandemic meant a loss in revenue, many churches have had to make difficult decisions about their staffing. Decisions that have affected people they love. 

However, there is a tax credit that pastors may be unaware of that can provide much-needed relief: the Employee Retention Credit (ERC)

The ERC was originally designed to provide financial assistance to for-profit businesses but was extended to non-profit organizations, which means churches can also take advantage of this credit. 

In fact, churches may actually be particularly well-suited to benefit from the ERC. A high degree of employee loyalty might mean meeting the eligibility requirements more easily. In this article, we’ll take a closer look at what the Employee Retention Credit is, how it works, and how churches can take advantage of it to support their staff and continue their mission.

Related: Find out if your church qualifies for the Employee Retention Credit

What is the Employee Retention Credit (ERC) and how does it work?

The Employee Retention Credit (ERC) was introduced by the CARES Act in March 2020. The ERC credit is available for wages paid for 18 months in 2020 and 2021. To qualify for the credit, organizations must have experienced a significant decline in gross income or been subject to a full or partial suspension of operations due to a government order. The credit is based on the wages paid to employees during the eligible period. 

The maximum credit available is $26,000 per employee. $26,000! (Let’s make sure that money makes it back into the Kingdom!)

Does my church qualify for the ERC?

To qualify for the ERC, a church (or any 501c3) must meet certain criteria. First, the church must have been in operation for at least one year prior to the COVID-19 pandemic. Second, the church must have experienced a significant decline in gross receipts or been subject to a full or partial suspension of operations due to a government order. 

How churches can benefit from the ERC

Churches can utilize credit from the ERC to pay wages and benefits, including employee healthcare benefits such as qualified sick leave and qualified family leave wages under the Families First Coronavirus Response Act (FFCRA).

Churches can also use the ERC credit to offset the cost of providing employee training and development opportunities for their staff, helping them to continue to grow as leaders and stoke their enthusiasm for service, too.

Ultimately, the credit can be a benefit to churches that were financially impacted by COVID. (Is that you? Find out.)

How to claim the ERC for your church

To claim the ERC, the church must file Form 941, Employer’s Quarterly Federal Tax Return. The credit can be claimed on Line 11c of Form 941.

But you don’t have to figure this all out by yourself! 

We want your church to be able to thrive and take care of your staff members. We can let you know if you qualify for the ERC and help you connect with the funds the government reserved for your church.To learn if your church is eligible to file for the ERC credit, contact us and find out how we can help here.