The restaurant industry has faced unprecedented challenges in recent years, from pandemic-related
shutdowns to ongoing labor shortages and rising costs. For many restaurant owners, the Employee
Retention Credit (ERC) has been a financial lifeline, offering a refundable tax credit to help businesses
retain employees during tough times. However, the clock is ticking. With the deadline to claim the ERC
for eligible quarters fast approaching—April 15, 2025, for 2021 tax periods—now is the last chance for
restaurants to maximize this opportunity before it’s gone for good.
What is the Employee Retention Credit?
The ERC was introduced as part of the CARES Act in 2020 to incentivize employers to keep workers on
payroll during the economic fallout of COVID-19. It provides a credit of up to $5,000 per employee for
2020 and up to $7,000 per employee per quarter for the first three quarters of 2021—potentially
totaling $26,000 per employee over the program’s lifespan. For restaurants, which often rely on large
staffs of servers, cooks, and support personnel, this credit can translate into substantial savings.
Eligibility hinges on meeting one of two criteria: a significant decline in gross receipts (typically a 50%
drop in 2020 or 20% in 2021 compared to the same quarter in 2019) or a full or partial suspension of
operations due to government orders, such as indoor dining bans. Given the widespread restrictions on
dining during the pandemic, many restaurants qualify under this second condition, even if their revenue
didn’t plummet.
Why Restaurants Should Act Now
Restaurants were among the hardest-hit industries during the pandemic, making them prime candidates
for the ERC. Whether you’re a small family-owned diner or a bustling urban café, the credit can offset
payroll costs incurred during qualifying periods. However, the IRS has set strict deadlines for claiming
this credit through amended payroll tax returns: April 15, 2024, for 2020 quarters, and April 15, 2025,
for 2021 quarters. Since the 2020 deadline has already passed, restauranteurs must focus on 2021
claims—and time is running out.
Recent developments have also made this an opportune moment to file. The IRS moratorium on
processing new ERC claims, implemented in 2023 due to a surge in fraudulent applications, has been
lifted. The new IRS Commissioner, Billy Long, has signaled a more ERC-friendly stance, aiming to
expedite legitimate claims. This shift offers hope for restaurant owners who may have hesitated to apply
earlier due to processing delays or confusion over eligibility.
The Risks of Waiting
Procrastination could cost restaurants dearly. The April 2025 deadline is firm, and late filings will not be
accepted. Moreover, the complexity of ERC calculations—factoring in qualified wages, employee counts,
and government orders—means preparation takes time. Waiting until the last minute risks errors that
could lead to rejected claims or audits. Partnering with a reputable CPA or ERC specialist can streamline
the process, ensuring compliance and maximizing your refund.
How to Get Started
First, review your restaurant’s records from 2021. Did you face capacity limits or closures due to local
mandates? Did your revenue dip compared to 2019? If so, you likely qualify. Next, gather payroll data,
including Form 941 filings, to calculate eligible wages. Finally, consult an ERC professional familiar with
ERC filings—preferably one specializing in the restaurant industry—to file an amended return before the
deadline.
A Financial Boost for Recovery
For many restaurants, the ERC isn’t just a credit—it’s a chance to recover and reinvest. Funds can cover
rising food costs, boost employee wages to combat turnover, or even fuel expansion plans. Take, for
example, a mid-sized restaurant with 20 employees. If fully eligible, it could claim up to $420,000 for
2021 alone. That’s transformative money in an industry with razor-thin margins.
Final Call to Action
The ERC is a rare opportunity for restaurants to reclaim funds they deserve—but only if they act swiftly.
With less than two months until April 2025 the time to file is now. Don’t let this chance slip away.
Contact a tax professional today, review your eligibility, and secure your restaurant’s financial future
before the deadline closes the door on this relief forever.
