Retail businesses have been hit particularly hard by the pandemic. As a result, many retailers have had to furlough or lay off employees, devastatingly impacting their ability to serve customers and generate revenue. The Employee Retention Credit (ERC) is designed to provide some relief to retailers by giving them a tax credit for retaining employees during the pandemic.

The Employee Retention Credit is a tax credit that was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 to help businesses retain their employees during the COVID-19 pandemic. The ERC is available to companies of all sizes, including retail businesses. It can provide significant financial relief to those that struggled to keep their doors open and may still be struggling.

Eligibility and Claiming the ERC for Retail Businesses

To qualify for the ERC, retail businesses must meet specific eligibility requirements, including having experienced a significant decline in gross receipts during the pandemic. A significant decline is defined as a 50% or greater decline in any 2020 calendar quarter when compared to the same quarter in 2019. For 2021, the threshold is lowered to a 20% or greater decrease in gross receipts compared to a comparable quarter in 2019.

The maximum credit for 2020 is $5,000 and $7,000 per quarter for the first three quarters of 2021, making the full credit $26,000 per employee. To claim the ERC, a retail business must file Form 941-X, the employer’s quarterly tax return, with the Internal Revenue Service. The ERC can be claimed on this form for the applicable quarter. 

It is important to note that businesses that received a Paycheck Protection Program (PPP) loan are also eligible for the ERC. However, the wages used to calculate the ERC cannot be the same wages used to calculate PPP loan forgiveness. 

In addition to providing financial relief to retail businesses that retained some of their employees in 2020 and 2021, the ERC can also help these businesses keep their current employees as they rebound from the economic effects of the pandemic. By providing a tax credit for employee wages, the ERC allows some retailers to keep staff on their payroll, which helps ensure they can continue serving customers and generating revenue.

Bottom Line Concepts Can Help 

Bottom Line Concepts can help you determine your eligibility for the Employee Retention Credit and maximize the amount your business receives. While the ERC is complex, and many accountants are unaware of its intricacies, our ERC experts will ensure you file correctly and receive the maximum credit you’re entitled to. Contact us today for details.