Efforts to replenish the Restaurant Revitalization Fund (RRF) are being debated in Congress right now, but restaurants and bars can currently find significant cash aid from a refundable employee payroll tax credit—the Employee Retention Credit (ERC).
The ERC has already provided millions of dollars to a broad spectrum of employers, including restaurant and bar owners, and will continue paying out for employers who claim the credit.
And, unlike the RRF, the ERC has no federal funds cap. So, any business that qualifies and applies can still find aid via the ERC!
Launched in March 2020, the ERC remains one of the biggest aid opportunities that is available to restaurants and bars that have been negatively impacted by the COVID-19 pandemic. And, even for those businesses beginning to recover now, employers can retroactively claim the ERC based on hardships experienced during 2020 and the first three quarters of 2021.
ERC Is Available Even If You Received PPP Loans, RRF Grants, & Other Aid
Employers should also remember: (1) the ERC is available even if they have already received Paycheck Protection Program (PPP) loans, Shuttered Venue Operator Grants or RRF grants, and (2) businesses that started up after February 2020 may qualify under specific ERC provisions that can provide up to $100,000 in refundable credits for 2021.
Also, ERC is not a loan like PPP and does not need to be paid back or forgiven – it is a check from the Department of Treasury for up to $26,000 per employee to help your business after the turbulence of the past two years.
How to Determine If You Are Eligible for ERC
Restaurants and bars are typically eligible because of the wide variety of local, state, and federal government orders that restricted their operations.
Common ways restaurants may be eligible for ERC include, but are not limited to:
- In house dining and carry-out restrictions/spacing of tables
- A state or local order requiring employees to work remotely
- Restricted public gatherings or capacity limitations impacting events like wedding receptions and pre-planned conferences
Note that orders creating qualifying partial suspensions were more common than many employers and tax practitioners realize, so even if you have already talked to your CPA then it may still be worth asking for a second opinion.
Another way for restaurants and bars to be eligible for the ERC is by showing that the business had a reduction in gross receipts.
1. Tax Year 2021 (Quarters 1, 2, and 3):
Employer is eligible if the business had a reduction of gross receipts of at least 20% or more compared to the same quarter in 2019.
2. Tax Year 2020 (Quarters 1 through 4)
Employer is eligible if the business had a reduction of gross receipts of at least 50% or more compared to the same quarter in 2019.
How to Claim the ERC For Your Business
The ERC remains available now for 2020 and 2021. Numerous local, state, and federal government orders restricted a broad range of ordinary business operations in the hospitality industry—and you may be one of many employers entitled to this significant aid program.
Talk with the team at Strategic Tax Planning to maximize your ERC claims. We offer a free evaluation of your claim and we are capable of navigating the complicated IRS regulations to ensure you are getting the maximum benefit.
Most CPAs and other tax professionals simply do not have the time to dive into the moving parts of the ERC program. That’s why we’ve created a dedicated team that is focused solely on the ERC and ensuring you get the maximum credit.
Visit our website at smartertaxplanning.com/food – we can typically determine your eligibility and credit estimate within 24 to 48 hours. This service is complimentary.
If you have any questions about the ERC and how it applies to your business, don’t hesitate to give us a call at (202) 455-6010 or visit our website at smartertaxplanning.com.