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July 30, 2023

Are Churches Eligible For Employee Retention Credit?

You’re likely wondering if churches are eligible for the Employee Retention Credit (ERC). The answer is yes. Despite being religious organizations, churches can benefit from this federal program just like other businesses and nonprofits.

As an essential part of the community, your church may have experienced financial strain because of the pandemic, and understanding how to utilize programs like ERC can be crucial for its survival.

We can provide you with detailed information about the Employee Retention Credit (ERC), specifically focusing on how it applies to churches and nonprofit organizations. We’ll also take a closer look at whether wages paid to pastors qualify for this credit.

So, let’s clear up any uncertainties you might have about ERC eligibility for churches and help guide you through these tough economic times.

Can Churches qualify for ERC credit?

Yes, your church can indeed qualify for the Employee Retention Credit (ERC), but it’s essential to remember that each situation is unique and there may be additional complexities to consider.

Since most churches file quarterly 941 forms on which ERC is based, they generally meet the criteria. However, it’s crucial to understand the two main qualifying tests: the gross receipts test and the government mandate test.

The gross receipts test requires a significant decline in business due to COVID-19 compared to previous quarters. It’s a bit tricky for churches because defining ‘gross receipts’ for a nonprofit organization like yours might not be straightforward as it would be for traditional businesses.

On the other hand, the government mandate test considers whether your operations were fully or partially suspended due to government orders related to COVID-19. If your church had to limit services or activities in compliance with such orders, you might likely meet this criterion.

Remember also that ERC credit rates vary between 2020 and 2021. For eligible quarters in 2020, you could receive up to $5,000 per employee per quarter while in 2021, this increases significantly up to $7,000 per employee per quarter or even $21,000 per employee annually.

Determining if your church qualifies for ERC is no simple task and calculating precisely how much credit you’re entitled can seem daunting. But don’t let this deter you from exploring whether your institution could benefit from this relief measure during these challenging times.

What is the Employee retention Credit for churches?

Religious institutions can certainly benefit from this significant financial relief program, which offers a substantial refund on payroll taxes to help keep their dedicated staff onboard during these trying times.

The Employee Retention Credit (ERC) is designed specifically with employers in mind, providing aid in the form of a fully refundable tax credit that can be applied directly to your organization’s payroll expenses.

This means you, as a church or place of worship, could receive up to $5,000 per employee for 2020 and even more for 2021 – up to $26,000 per employee! This isn’t just extra money; it’s essential financial support aimed at helping you retain your committed employees who are integral to the fulfillment of your mission and service to your community.

Imagine what such relief could mean for your institution. Maybe it would allow you to maintain current staffing levels despite decreased donations. Perhaps it could provide some breathing room as you navigate through these challenging economic conditions brought on by the pandemic. It might even make it possible for you not only to survive but thrive during this difficult period.

Remember, applying for and receiving this credit isn’t something that’s nice-to-have; it’s vital assistance intended specifically for organizations like yours in these tough times. So don’t hesitate or feel uncertain about tapping into this resource – consider the ERC as an opportunity provided precisely when needed most.

So there you have it! That’s the Employee Retention Credit in a nutshell: A powerful financial tool designed expressly with churches and other religious institutions in mind during these unprecedented times. It’s time to take advantage of this crucial lifeline and secure the future operations of your church or place of worship.

Do nonprofits qualify for Employee Retention Credit?

Nonprofits, including charitable organizations and even schools, can indeed tap into this vital financial lifeline, as they too are eligible for the benefits offered by the ERC. The Employee Retention Credit (ERC) presents a unique opportunity to recover some of the financial losses inflicted by COVID-19. It’s crucial to understand that qualification is not limited only to businesses; nonprofits and religious entities like churches are also included.

This inclusion is facilitated through payroll taxes, making it possible for nonprofit organizations, which typically don’t pay these taxes, to qualify. There are two main paths your nonprofit can take towards qualification: government orders and the Gross Receipts Test.

If your organization was subjected to full or partial suspension due to governmental mandates limiting commerce, travel or group meetings in response to COVID-19, you might be eligible for ERC. Any wages that were paid during these shutdowns could potentially qualify. This route may particularly resonate with nonprofits whose operations heavily rely on physical gatherings.

The second path revolves around the Gross Receipts Test – a widely used metric beyond just nonprofits. If there’s been more than a 20% decrease in gross receipts in any quarter of 2021 compared with the same quarter in 2019, your organization stands a strong chance at qualifying for ERC benefits under this test.

So yes, even if your nonprofit wasn’t directly affected by government-imposed shutdowns but suffered from reduced attendance or donations leading to lower revenue – you still have viable routes towards qualification via the Gross Receipts Test.

Do pastors’ wages qualify for ERC?

While clergy, including pastors, are typically exempt from federal payroll taxes, this doesn’t automatically translate into their wages being counted when determining Employee Retention Credit (ERC) benefits. You might be wondering how pastors’ wages fit into the picture given their unique tax status.

Here’s what you need to know:

  • The ERC is designed to encourage employers to keep employees on their payroll during COVID-19 related closures or slowdowns. However, since clergy are exempt from FICA taxes and churches don’t pay these taxes for them, pastors’ wages might not be considered.
  • The IRS guidelines stipulate that you can only consider taxable wages and compensation when determining your ERC eligibility and amount. As a church employer, if your pastor’s compensation isn’t subject to federal income tax withholding due to religious exemptions, then it may not qualify for the ERC.
  • While there’s still some uncertainty about whether or not pastors’ wages qualify for the ERC due to the lack of explicit IRS guidance on this specific issue, it’s generally safe to assume that any wages exempt from federal taxation won’t count towards your credit calculation.

It’s important for churches and other faith-based organizations considering applying for the ERC to carefully review all relevant rules and requirements. If you’re unsure about anything regarding eligibility or calculations, seek professional advice. Keep in mind that understanding these distinctions can ensure accurate application process while potentially avoiding penalties associated with miscalculations or misinterpretation of rules surrounding tax-exempt statuses like those held by pastors.


Yes, churches can qualify for the Employee Retention Credit (ERC). This credit is designed to help organizations keep their employees on board during financial hardships. Nonprofits, including churches, are eligible. Even pastors’ wages can potentially qualify for the ERC. It’s essential to stay informed and consult with a tax professional to navigate these opportunities effectively.

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