Under the CARES Act, an eligible church may be able to offset the impact of COVID-19 with an Employee Retention Credit. You must continue to pay employees during a COVID-19 related closure and carry on with church at some point during 2020 to be eligible for the credit.
A qualifying closure occurs during any calendar quarter of 2020 in which:
- The operation of your church is fully or partially suspended 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); or
- Your gross receipts are less than 50% of your gross receipts for the corresponding quarter in 2019
This credit is not available to churches that receive a loan under the Paycheck Protection Program.
Generally, if your church meets these requirements, you may be eligible to receive a tax credit that includes, but is not limited to:
- A refundable tax credit for up to 50% of the total wages paid to employees during the closure.
- The maximum you can receive is $10,000 of wages ($5,000 of credits) per employee.
The Employee Retention Credit is a refundable tax credit for up to 50% of qualified wages up to $10,000 of wages from March 13, 2020 to December 31, 2020. Meaning, you can take up to $5,000 in credits per eligible employee until the end of 2020.
The credit is allowed against the employer portion of social security taxes.
For more details, see the IRS website.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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