You probably have heard about the Employee Retention Credit (ERC). It would be surprising if you haven’t because it is being marketed heavily through spam, robocalls, television commercials, and social media ads. These firms are looking to pique your interest (or prey on your financial need) by promising large sums of money through this legitimate Federal Program while charging organizations (including churches and ministries) between 15-30% of their credit. These absorbent fees have caught the IRS’s attention, causing the IRS to issue warnings to raise public awareness and indicating the potential for increased scrutiny and audits around ERCs.
We understand the allure of getting “free money,” but there are no free lunches. The fee might not sound so bad at first–and if you need the funds desperately enough, perhaps it might even seem like a blessing for you to connect with one of these firms. After all, isn’t it better to get 70% of something instead of 100% of nothing? But those aren’t the only two options.
It’s vital to understand that ERC itself IS a legitimate Federal Program. At its core, the ERC is a refundable payroll tax credit established by the Federal Government for organizations and ministries to help with the costs of keeping staff employed during the pandemic. The government understands that many organizations had to go to great lengths to keep people employed during an unprecedented global crisis. The ERC program acknowledges and allows eligible employers to receive a max credit of up to $26,000 per employee ($5,000 for 2020 and $21,000 for 2021).
Next, it is worth noting that ERC differs from other pandemic-era stimulus payments, such as the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). Here are some of the key differences:
- ERC is a tax credit, not a loan (i.e. it does NOT need to be paid back).
- ERC does not have specific usage requirements.
- ERC does not yet have a defined deadline for filing.
The actual amount you will qualify for depends upon several variables, including how Covid and the subsequent governmental orders impacted your organization, the number of employees your organization had during specific quarters in 2020 and 2021 and their qualified wages, your involvement with PPP, and much more. Determining your organization’s eligibility and subsequent credit amount (if any) should require a meaningful conversation.
Kingdom One offers free initial ERC consultations if you want to learn more about ERC and how it might impact your organization. Additionally, if you are looking for an ERC partner to provide ERC services for your church, this is one of the offerings of our Kingdom One Finance and Accounting Talent Group. We operate transparently, and our ERC fees will NEVER exceed 5%. Our heart is to help churches and ministries become courageous, healthy, and effective. Please email email@example.com if you have any questions.