PSA for MMMers part of Washington state churches, mosques, synagogues, temples

[SeattleCPA]

Yesterday, the IRS posted a notice that said too many exempt organizations are getting conned by the employee retention credit "consultants." That's probably true.

But this comment for anyone here who's a member of a Washington state faith community. Gov Inslee's proclamations basically guarantee that your house of worship qualifies for five quarters of employee retention credits. That's often $50K or $100K refund... sometimes even $200K refund to your church, mosque, synagogue or temple if you guys employ W-2 wages. (Not all faith communities employ people obviously.)

If anyone here is interested, I'll post the statement you include in the 941 to document the eligibility.

P.S. Apologies to folks living in other states whose taxes fund these tax credits. FWIW, I'm not sure the public policy decisions made by Washington state were all good. But at this point, that's sort of irrelevant.

[dandarc]

I felt like our payroll provider ripped our church off a bit by charging something like $1-2K to file the appropriate 941X's to claim this, but at the end of the day that was the easy-button to push to get that big check for 2021 ERC's, so that's what we did. Payroll company of course is in the best position to claim this - their software handles it, they've got all of the relevant information other than "does the org qualify?", they are already set up to e-file the relevant forms. Anyway, we're not in Washington but this is still top of mind for me.

Do you happen know if a minister's compensation typically qualifies for the ERC? I imagine for many churches, the minister could be the only employee. In our case we were under the impression that it did not - our minister is a W2 employee, however we do not withhold FICA for them and they presumably either have opted out entirely of social security or pay self employment tax themselves, and I'm pretty sure we saw guidance somewhere that the minister's pay cannot qualify for ERC, but I'm struggling to find that quickly today. Certainly not above seeking another $21K (70% of first $10K of compensation each quarter, right?) in tax credits if we had that part of it wrong.

Edit: nevermind - I found something. Minister's pay does not qualify for the ERC. https://taxnews.ey.com/news/2020-1668-irs-updates-employee-retention-credit-faqs-affecting-tax-exempt-organizations

"The minister's salary and housing allowance do not constitute wages under IRC Section 3121(a) and therefore are not qualified wages for ERC purposes."

[SeattleCPA]

I felt like our payroll provider ripped our church off a bit by charging something like $1-2K to file the appropriate 941X's to claim this, but at the end of the day that was the easy-button to push to get that big check for 2021 ERC's, so that's what we did. Payroll company of course is in the best position to claim this - their software handles it, they've got all of the relevant information other than "does the org qualify?", they are already set up to e-file the relevant forms. Anyway, we're not in Washington but this is still top of mind for me.

Do you happen know if a minister's compensation typically qualifies for the ERC? I imagine for many churches, the minister could be the only employee. In our case we were under the impression that it did not - our minister is a W2 employee, however we do not withhold FICA for them and they presumably either have opted out entirely of social security or pay self employment tax themselves, and I'm pretty sure we saw guidance somewhere that the minister's pay cannot qualify for ERC, but I'm struggling to find that quickly today. Certainly not above seeking another $21K (70% of first $10K of compensation each quarter, right?) in tax credits if we had that part of it wrong.

Edit: nevermind - I found something. Minister's pay does not qualify for the ERC. https://taxnews.ey.com/news/2020-1668-irs-updates-employee-retention-credit-faqs-affecting-tax-exempt-organizations

"The minister's salary and housing allowance do not constitute wages under IRC Section 3121(a) and therefore are not qualified wages for ERC purposes."

Good point. And I should have been clearer about that. Wages means W-2 wages basically. (There is a way to get sick wages for even a minister into the refund calculations.)