One of many good issues about December’s COVID-19 aid package deal—beside the truth that it offered one other spherical of Payroll Safety Program largely centered on small companies—is that it fastened or improved some elements of earlier payments.
Considered one of these points is the Worker Retention Tax Credit score.
“The ERTC in its present model is much extra interesting,” says Stan Harris, president and CEO, Louisiana Restaurant Affiliation. “The primary construction of ERTC was utilized by these operators who selected to not search PPP, or who had ample capital or strains of credit score.” The brand new model, he says, lets operators benefit from each the ERTC and a PPP mortgage, in the event that they get the timing proper.
December’s Taxpayer Certainty and Catastrophe Tax Aid Act contains a number of adjustments and enhancements to the ERTC that may assist you to hold staff on employees after you’ve run by means of PPP mortgage cash.
Now, in the event you’re eligible, you possibly can entry ERTC for as much as $5,000 per eligible worker for a calendar quarter in 2020, and as much as $7,000 per eligible worker per quarter in 2021 from January 1, 2021 by means of June 30, 2021.
Listed here are the highlights:
Eligible eating places. Eating places with 100 or fewer full-time staff can entry the ERTC for workers working in 2020. Corporations with 500 or fewer full-time equal staff (FTEs) can entry the ERTC for these staff working in 2021. The tax credit are solely obtainable for payroll wages and/or group advantages you didn’t pay immediately with PPP mortgage funds. Your employer standing (small or massive) is predicated on the mixture variety of FTEs you employed in 2019.
Eligible staff. FTEs are those that work not less than 30 hours per week or 130 hours a month.
If you happen to first opened in 2019, calculate the quantity by taking the sum of the variety of FTEs in every full calendar month your restaurant was open in 2019 and divide by that variety of months.
If you happen to first opened in 2020, use the identical method to calculate your FTEs.
Eligible circumstances. Since lawmakers meant this as pandemic aid, you possibly can solely get the ERTC if 1) your operation was partially or totally suspended by governmental authority because of COVID-19 (together with capability restrictions because of social distancing, closure of indoor eating, or closure of all on-site eating); or 2) what you are promoting skilled a big decline in gross sales when evaluating a calendar quarter (or prior quarter) to its matching quarter in 2019.
Eligible wages. Certified wages are outlined by IRS Code in section 3121(a) and section 3231(e). You may embody group well being plan bills, corresponding to month-to-month insurance coverage premiums, which can come as a aid to many eating places who proceed to help their employees. “Even throughout financial hardship, eating places have been sustaining well being advantages to make sure their staff have entry to their medical suppliers and pharmaceuticals all through the pandemic,” stated Clinton Wolf, senior vice chairman of Well being & Insurance coverage Providers on the Nationwide Restaurant Affiliation.
And bear in mind, you possibly can’t apply for the credit score for 1 / 4 wherein you used PPP mortgage funds to immediately pay wages. However in the event you exhausted PPP mortgage cash by say, September final yr, you can apply the ERTC to eligible staff for the fourth quarter of 2020.
ERTC advances. To use for advance fee of worker retention credit, fill out IRS Form 7200.
The article “Big tax credits to restaurants could support employee retention” has extra examples. And obtain and share our detailed ERTC explainer.
