The ERC for Restaurants: Maximizing Relief Benefits for the Food Industry

The COVID-19 pandemic has had a devastating impact on the restaurant industry. According to the National Restaurant Association, the restaurant industry lost over $290 billion in sales in 2020 alone.

Many restaurants had to close their doors permanently, and many smaller restaurants that remain open need help financially. However, restaurant relief funds are available as the Employee Retention Credit (ERC).

The ERC is a tax credit created under the CARES Act in March 2020. It is designed to provide financial assistance to businesses impacted by the COVID-19 pandemic, including restaurants. The credit is based on the wages paid to employees and applies to companies that kept their employees on the payroll during the pandemic.

Contents

ERC Eligibility Criteria

To be eligible for the ERC, a business must meet one of the following criteria:

The business’s operations were fully or partially suspended due to a government order related to COVID-19.
The restaurant experienced a significant decline in gross receipts, defined as a decline of 50% or more in 2020 compared to the same quarter in 2019. The reduction is only 20% or more in 2021 compared to the same quarter.

If a business meets one of these criteria, it can claim the ERC for wages paid to employees from March 13, 2020, through September 30, 2021. The credit equals 50% of the qualified wages paid to each employee, up to a maximum credit of $5,000 per employee in 2020 and $21,000 for the first three quarters of 2021.

The IRS permits tips employees receive and reports to the employer to count as qualifying wages for the restaurant employee retention credit.

How the ERC Benefits Restaurants

The ERC can provide significant financial assistance to restaurants that the COVID-19 pandemic has impacted. Here are some of the key benefits of the ERC for restaurants:

Financial Assistance: As the restaurant rebounds, the ERC can provide much-needed financial assistance to struggling post-pandemic restaurants, such as buying supplies and meeting payroll requirements.

Employee Retention: The ERC helps restaurants keep their employees on the payroll. By providing a tax credit for wages paid to employees during COVID, the ERC can help restaurants retain their staff, which is essential for continuing operations.

Cash Flow: The ERC is a refundable tax credit, which means that if the credit exceeds the amount of payroll taxes owed, the excess credit will be refunded to the business. This can provide a much-needed cash infusion for restaurants struggling with cash flow issues.

Bottom Line Concepts Can Help You Claim the ERC

To claim the ERC retroactively for wages paid in 2020 and the first three quarters of 2021, restaurants must file Form 941-X, Employer’s Quarterly Federal Tax Return. Determining eligibility and the amount of the tax credit your restaurant is due can be complex, and the forms submitted to the IRS must be 100% accurate to receive your credit.

Bottom Line Concepts has helped over 25,000 businesses enroll in the ERC program, including many restaurants. Contact us today to see if you qualify and how to claim this valuable credit you may be entitled to.