The pandemic has had a devastating impact on the restaurant industry. Many businesses have been forced to close their doors due to restrictions put in place by local and state governments, leaving both employees and owners out of work, and the restaurant industry was one of the industries that got hit the hardest.
Restaurants had some of the most stringent regulations to have to deal with COVID-19. First, they had to close for an extended period of time, and even when they were allowed to re-open, they were forced to have social distancing eliminating many service areas that normally would bring in income. They also had to put up barriers and invest in other covid related products which cost money that the majority did not have at the time. These are just a few things that qualify the restaurant industry for ERC funding
This is why the Employee Retention Credit (ERC) was established–to provide financial assistance for restaurants affected by COVID-19. The ERC is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that passed in March 2020. It provides refunds for eligible employers who retain or rehire employees during 2020.
ERC Qualifications
Restaurants are eligible for ERC funding if they meet certain criteria established by the Internal Revenue Service (IRS). To qualify, employers must show that their gross receipts were less than 50% of what they took in during 2019 OR demonstrate a decline in quarterly gross receipts compared to 2019 when comparing any quarter of 2020 with its corresponding quarter from 2019. Furthermore, employers must also have an average number of full-time employees of less than 500 per month during either 2020 or 2021.
Most restaurants received a Paycheck Protection Program (PPP) loan that was forgiven. There are many so-called experts that think that this disqualifies them from receiving ERC funding. It does not disqualify them and it is pretty much the opposite. If a restaurant received PPP, it is highly likely that it will also receive ERC funds that have been put aside for their business alone.
How much can Restaurants Receive?
The amount of credit available depends on several factors including how much wages were paid out and whether health insurance premiums were also paid out during that period. Generally speaking, however, it can be as high as $5000 per employee for 2020 and up to $7 000 per employee per quarter in 2021 for the first three quarters. If all conditions are met and the restaurant did not receive PPP then they may receive up to $26 000 total credits. Once again receiving PPP does not disqualify a restaurant owner from receiving ERC, but it will lessen the refund.
ERC funds can be extremely beneficial for small business owners such as restaurants who may be struggling financially due to decreased sales amid post-pandemic revival. Not only does it help cover wages but it also helps alleviate some payroll taxes associated with those wages such as federal employment taxes. like Social Security tax and Medicare tax withholdings from employee paychecks, as well as employer matching contributions towards these taxes which would otherwise need to be paid out-of-pocket without ERC funding available.
Overall, the Employee Retention Credit is an excellent option available specifically designed for qualified restaurants suffering economically due to directly resulting effects caused by COVID-19. So long as all required conditions are met accordingly, restaurant businesses should certainly consider taking advantage whenever feasible given the overall potential cost savings associated. Â
If you are a restaurant owner and were told you do not qualify, it is best to get a second opinion from an experienced ERC company that understands all the qualifying options. It is truly worth the 15 minutes of your time and it’s free.
