Form 5884-D: Employee Retention Credit for Certain Tax-Exempt Organizations Affected by Qualified Disasters

Form 5884-D: Employee Retention Credit for Certain Tax-Exempt Organizations Affected by Qualified Disasters

IRS Form 5884-D, Employee Retention Credit for Certain Tax-Exempt Organizations Affected by Qualified Disasters, allows eligible tax-exempt organizations to claim the Employee Retention Credit (ERC) if they were impacted by qualified disasters. This special provision helps qualifying organizations maintain their operations and retain their employees in the face of natural or other federally declared disasters.

This guide will provide an in-depth explanation of Form 5884-D, covering who is eligible to file, the benefits of the credit, the information required to complete the form, and the key deadlines.

What is Form 5884-D?

Form 5884-D was introduced by the IRS to enable tax-exempt organizations affected by certain qualified disasters to claim the Employee Retention Credit (ERC). The ERC was initially designed to provide relief to businesses and organizations impacted by the COVID-19 pandemic. However, it was expanded to include disaster relief for qualifying tax-exempt entities affected by other types of qualified disasters.

The Employee Retention Credit offers financial relief by providing a tax credit for wages paid to employees during periods when organizations were severely impacted by a disaster or a public health emergency. Tax-exempt organizations eligible for this relief can use Form 5884-D to claim the credit for wages paid during the disaster-affected period.

Who is Eligible to File Form 5884-D?

Only certain tax-exempt organizations are eligible to claim the Employee Retention Credit under Form 5884-D. To qualify, organizations must meet the following criteria:

1. Tax-Exempt Status
   The organization must be recognized by the IRS as tax-exempt under section 501(c)(3) or other applicable subsections, such as 501(c)(4) or 501(c)(6).

2. Location in a Disaster Zone
   The organization must be located in an area affected by a “qualified disaster” as declared by the President of the United States. This can include natural disasters like hurricanes, floods, wildfires, or other federal disaster declarations that cause a significant impact on the organization’s ability to function.

3. Impact of the Disaster
   The organization must demonstrate that it was unable to operate normally due to the disaster. This could include mandatory closures, reduced capacity, or other disruptions to its operations caused by the qualified disaster.

4. Wages Paid During the Affected Period
   The organization must have continued to pay wages to employees during the period of disaster-related disruptions. This is the period during which the organization can claim the credit.

5. Filing a Federal Employment Tax Return
   The organization must have filed a federal employment tax return (such as Form 941 or Form 944) for the applicable quarters to report wages and taxes for its employees.

How Does the Employee Retention Credit Work?

The Employee Retention Credit (ERC) allows eligible employers, including tax-exempt organizations, to receive a refundable credit equal to a percentage of the wages paid to employees during the disaster-affected period. The credit amount varies based on the time and the disaster period.

Key points about the credit include:

• Credit Rate: The credit rate may differ depending on the disaster and year, but generally, it can range from 50% to 70% of the wages paid to qualifying employees, up to a maximum amount per employee.
• Eligible Wages: Wages that can be included in the credit calculation generally include both the employee’s regular salary and any health benefits provided.
• Eligible Employers: For ERC claims related to disasters, organizations must meet the IRS’s requirements for eligibility, including demonstrating that their operations were impacted during the disaster period.

Key Sections of Form 5884-D

Form 5884-D is divided into specific sections that guide organizations through the process of calculating and claiming the credit. Below are the key parts of the form:

1. Part I: Identification and Employer Information
   In this section, the organization must provide basic identification information, including the name, address, Employer Identification Number (EIN), and the IRS disaster declaration number. This helps the IRS identify the organization and the specific disaster event to which the claim is related.

2. Part II: Disaster Period Information
   This section asks for details about the qualified disaster period. The organization needs to specify the exact period when the disaster occurred and disrupted its operations. The IRS requires clear documentation of the start and end dates of the affected period.

3. Part III: Employee Retention Credit Calculation
   Here, the organization calculates the total amount of wages paid to employees during the disaster period and determines the credit it is entitled to receive. This section involves calculating eligible wages, including both the wages and any employer-paid health insurance benefits.

4. Part IV: Claiming the Credit
   The final section requires the organization to summarize the total credit it is claiming for each affected employee and the overall credit amount. The form also asks for any adjustments to be made to previously filed returns if necessary.