Are Colleges and Universities Eligible for the ERTC?

December 27, 2023
Dayes Law Firm

The ERTC tax refund can generate substantial sums for businesses and tax-exempt organizations, including colleges and universities. 

To understand the ERTC for universities and colleges, you must look into general eligibility criteria and how they apply to the educational industry. If your organization is an educational institution and you ask, “Can I claim the ERTC?” the short answer is, “Possibly, but work with a tax professional and check whether you qualify.”

Who Is Eligible for the ERTC?

Your organization might qualify for the Employee Retention Tax Credit (ERTC) if you kept employees on payroll during the COVID pandemic of 2020 and 2021, while your institution experienced:

  • Governmental order suspension or significant changes in operations related to the pandemic. In educational institutions, this usually played out as transitioning to distance learning.
  • Gross receipts decline amounting to at least 50% in 2020 and at least 20% in 2021 compared to the same calendar quarters in 2019. 

Please note that ERTC eligibility includes many nuances beyond these general guidelines. You should consult a reputable tax professional to verify that your organization is eligible for this refund and determine how much you can claim.

How Do Colleges and Universities Qualify for the ERTC?

Most institutions like colleges and universities enjoy a tax-exempt status since they benefit the public by providing education. However, this exemption applies to income tax, not payroll taxes.

Since colleges and universities pay employee payroll taxes, they may be able to claim the ERTC if they meet the eligibility requirements. 

Why Many Educational Institutions Overlook This Federal Tax Credit

There are many misconceptions surrounding the ERTC for universities and colleges. Some institutions are wary of ERTC scams, which have become so common that the IRS has issued multiple warnings to businesses and organizations. Many express concerns over possible IRS audits following an ERTC claim. Moreover, some people mistakenly believe that Paycheck Protection Program (PPP) loan recipients can’t claim the ERTC. 

In reality, the ERTC is a legitimate tax refund for qualifying educational institutions, and a college or university may be eligible for the ERTC even if it benefited from PPP loan forgiveness. However, employee wages covered by a forgiven PPP loan can’t count toward an ERTC claim.

Can Colleges and Universities Still Claim the ERTC?

Yes, it’s still possible to claim this valuable tax credit. The deadlines for ERTC claims for 2020 and 2021 are April 15, 2024, and April 15, 2025, respectively. 

However, new ERTC claims are currently under a moratorium until at least the beginning of 2024, and the IRS has extended standard processing times for pending claims. The reason for this new policy is a high volume of ineligible or inaccurate claims and ERTC fraud.

You can claim the ERTC through an amended Form 941-X, but expect a significant processing delay. Once the moratorium ends, the IRS will handle new claims based on the filing order.

Finally, if you claim this tax refund, please ensure your compliance. Save all payroll records and other documentation supporting your eligibility. Verify that you only include qualifying wages in your claim amount, and be ready to present any additional records the IRS asks for.

Contact Dayes Law Firm to Check Your ERTC Eligibility

If you work in the educational industry, you may wonder whether it’s possible to claim the ERTC for universities and colleges. Our team at Dayes Law Firm can check whether your organization qualifies for this tax refund, help you calculate amounts of eligible wages, and ensure your claim fulfills all IRS requirements.Please reach out by giving us a call at (800) 503-2000 or fill out our online form to schedule your free consultation today!