Can the ERTC Be Claimed for Employees Who Volunteered?

November 10, 2023
Dayes Law Firm

The COVID-19 pandemic took a hefty toll on individuals and businesses alike. Over 1,150,000 people lost their lives due to COVID-19 in the U.S. alone, and thousands of business owners were forced to shutter their doors permanently.

If your employees volunteered for COVID-19 relief efforts by doing things such as handing out food or raising funds, you may wonder whether you can claim the ERTC for them. Below, find ERTC advice that will help you know whether you’re eligible for this valuable tax credit.

Can Businesses Claim the ERTC for Volunteers?

The IRS says that businesses can only claim the ERTC for employees who they kept on payroll. If you are a small employer with fewer than 500 employees, you can claim the credit for all of them. Employers with more employees can only claim the credit for employees kept on payroll who weren’t providing services to the company.

What if any of those employees performed volunteer work for your company? If you did not pay your workers for volunteering, you cannot claim the credit for the hours they volunteered. However, you may claim the credit for wages paid to those workers.

There is one exception. If you used funds from Paycheck Protection Program (PPP) loans to pay employees, you can’t claim those wages for the ERTC.

COVID-19 volunteer relief workers may also be eligible for a federal tax exemption through the Volunteer Responder Incentive Protection Act (VRIPA). This act, signed into law by President Trump, provides $600 per year to volunteer emergency responders.

If you’re unsure whether you can claim wages for the credit, contact us for ERTC advice.

How Much Is the Credit Worth?

How much you can claim depends on the year for which you want the credit, how many employees you have, and how much in wages you paid them.

For 2020, you can claim up to $5,000 per employee. For 2021, you may claim up to $7,000 per employee per quarter (a maximum of $21,000 for the first two quarters of 2021 and a maximum of $28,000 for the third quarter).

Is Your Business Eligible?

Not every business qualifies to claim the ERTC. To be eligible, you must meet one or both of the following criteria:

  • You suffered a full or partial suspension of business operations because of a government order limiting travel, commerce, or meetings.
  • You had a serious drop in gross receipts.

What does the IRS mean by a “serious drop?” That depends on the year for which you’re filing. For 2020, you must have at least a 50% drop in receipts compared to the same quarter of the previous year. For 2021, you’ll need a drop of 20% or more.

Businesses that opened on or after February 15, 2020, may also qualify as recovery startups. To be eligible, you must have at least one employee, and your business must have had less than $1 million in gross receipts for the previous three years.

How To Claim the Credit

The IRS will not automatically send you money for the ERTC if you’re eligible. Rather, you must claim the credit by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

You’ll need to submit the form by mail because the IRS doesn’t accept online submissions for Form 941-X. It may take six to eight weeks for your credit to arrive.

Reach Out to Dayes Law Firm for More ERTC Advice

If you want to know whether you can claim the credit for employees who provided volunteer services, contact our attorneys at Dayes Law Firm. Call (800) 503-2000 for your free consultation.