Nonprofit Employee Retention Credit – $26,000 Per Team Member is Jimmy LaRose’s take on why charities need to apply for the Employee Retention Credit (ERC).
According to LaRose , “It’s been jaw-dropping to see how many nonprofit organizations are FAILING to take advantage of the Employee Retention Credit. I’m not sure charities understand that they already paid their payroll taxes for 2020 and 2021 and if they properly amend and refile their 941 forms the U.S. Treasury will refund them as much as $26,000 per employee!”
When asked how he learned about ERC LaRose replied, “Taxcred Advisors got us started. They’re our newest newest NANOE enterprise member and with their expert guidance we successfully applied for our refund.”
The ERC was created as an incentive for nonprofit employers to retain their employees during COVID and was signed into law on March 13, 2020. (Initially you had to pick between taking PPP and the ERC and, at the time, PPP was more lucrative, so most charities with fewer than 500 employees took PPP.)
On December 28, 2020, the legislation changed, making the ERC the most lucrative tax credit in US History, and allowing companies that took PPP to qualify for the ERC. Other changes include:
Nonprofits are eligible to receive the ERC either through a reduction in revenue OR a “full or partial suspension of operations due to government orders”. Many charities qualify through a partial suspension of business operations so if your organization has experienced any operational impact due to COVID government orders you will want to get on this right away.
For reference, Forbes stated in a February 2022 article that “IRS management anticipated that approximately 70%-80% of small and medium businesses (as well as tens of thousands of charities) were good candidates for taking the ERC” and that “the reality is — to date the actual numbers of businesses and charities applying for the ERC — is far below that. Small and medium businesses (as well as tax-exempts/charities) are leaving billions of dollars on the table.”
These billions of dollars that Forbes references can be monetized as an above-the-line credit, unlike PPP, which was a loan. Once monetized, employers can use ERC funds however they deem necessary to survive or to drive growth, as the intention of the legislation, according to Forbes is “to help businesses and tax-exempts retain jobs, but more importantly, GROW AND EXPAND JOBS.”
LaRose had other interesting news, “Hundreds of major charities have been advocating for reinstatement of fourth quarter 2021 access to these dollars as well. In an open letter to Congress these organizations detailed the need to include 4th quarter of 2021, stating that, ‘The need for passage has only grown more dire as nonprofits face ongoing supply chain disruptions and increased inflation, making the costs of operating insurmountable in many cases.” This letter also notes that “The Employee Retention Tax Credit Reinstatement Act (H.R. 6161/S.3625) is strong legislation currently boasting over 100 bipartisan cosponsors across both chambers, including 57 Republicans and 46 Democrats. The legislation is supported by nonprofit organizations and is the best viable option to restore much needed assistance that was previously promised, but subsequently denied.’”
Signers of this letter include the American Heart Association, California Association of Nonprofits, Florida Nonprofit Alliance, Girl Scouts of the USA, Kansas Nonprofit Chamber, Kentucky Nonprofit Network, Maine Association of Nonprofits, Maryland Nonprofits, Michigan Nonprofit Association, Nonprofit Association of Washington, Nonprofit New York, North Carolina Center for Nonprofits, Professional Nonprofit Theater Coalition, United Way Worldwide, and YMCA of the USA, among many others
If The Employee Retention Tax Credit Reinstatement Act is signed into law, that’s more good news for your organization, as the maximum credit will go from $26,000 per employee to $33,000 per employee.
So, why are so many nonprofits overlooking this credit? In our estimation, there are three main reasons:
LaRose also went on to say, “Most nonprofits don’t have the resources to explore eligibility. That’s where NANOE partner, Taxcred Advisors, can help. Their team of experts partner with the largest privately-held tax credit company in the United States to ensure charities receive the maximum amount. They also provide a special discount available only to nonprofits.”
We asked Taxcred Advisors’ Director of Client Services, Bryan Tidd, to share what he and his team enjoy most about working with nonprofit clients:
“The thing I love most about the work we do is the look on clients’ faces when they realize the amount of money they are eligible to receive. Organizations were impacted by COVID in a myriad of different ways — especially nonprofit organizations — and the ERC can serve as a lifeline for them. Our happiest clients are often those that originally looked at the ERC, based in many cases on outdated information, and deemed that they were not eligible. After meeting with our tax credit partner, who evaluates their unique facts and circumstances to determine whether they qualify for the ERC or not, there is often a sense of relief when our clients see the opportunity that they almost completely missed. Taxcred Advisors acts as a conduit and referral source to our tax credit partner, who is the best in the industry, understands the legislation inside and out, and makes the process seamless for small and medium sized businesses, including nonprofits, that do not have the resources to evaluate eligibility nor calculate their credit. Regardless of how businesses fared during the pandemic, I don’t come across many businesses that couldn’t use up to $26,000 per employee to help them retain employees and grow their business. We are thrilled about our partnership with NANOE and the impact we can help them make on the nonprofit sector.”
If you would like to learn more about the ERC and how you can determine whether you’re eligible to receive up to $26,000 per employee, please schedule a 15-minute consultation here: calendly.com/erc-taxcred-nanoe
Director of Client Services | Taxcred Advisors
Phone: (908) 433-2384
Email: [email protected]
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(Charities use Form 941 to report income taxes, Social Security tax, and/or Medicare taxes withheld from their employee’s paychecks.)
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