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If you’re a restaurant or food-service business owner who sought out financial assistance in 2020 because of the pandemic, you may have overlooked the Employee Retention Credit as a cash infusion source for your business. The good news is this tax break is still available through the end of 2021. 

Here’s what you need to know how the credit works for your business. 

Background 

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was signed into law in March 2020. One of the provisions in the CARES Act was the Employee Retention Credit (ERC). The ERC is a refundable payroll tax credit that businesses can claim on qualified wages, including certain health insurance costs, which you pay to your employees. 

In 2020, restaurant and food service business owners could get a maximum credit of $5,000 per employee. In 2021, the maximum credit per employee is now $28,000. 

Does your restaurant or food service business qualify for the ERC? 

You’re eligible for the ERC if your restaurant experienced either of the following: 

  • A full or partial suspension of operations because of governmental orders that limit commerce, travel or group meetings due to COVID-19, or 
  • A decline in gross receipts in any calendar quarter where the gross receipts of that calendar quarter are less than 80% (50% in 2020) of the gross receipts in the same calendar quarter in 2019. 

Can I get the ERC if I also received a PPP loan? 

The CARES Act originally didn’t allow an employer that received a Paycheck Protection Program (PPP) loan to also claim the ERC. The American Rescue Plan Act, enacted in March 2021, overturned this section of the CARES Act. 

Retroactive to the March 27, 2020 enactment of the CARES Act, the law now allows restaurants and food service businesses who received PPP loans to claim the ERC for qualified wages that aren’t treated as payroll costs in obtaining forgiveness of the PPP loan. 

How do I claim the ERC? 

To claim the ERC, fill out your Form 941, quarterly payroll tax return. The amount of the ERC that your restaurant can claim will be reconciled on each of your quarterly 941 forms. 

In addition to claiming the ERC for all four quarters in 2021, you can also retroactively claim the ERC by filing Form 941-X for any quarters in 2020 for which your restaurant qualifies. 

Don’t wait! Contact your Padgett advisor today. 

With most of the press focusing on the PPP loan program over the past year, it was easy to overlook other financial assistance programs and tax breaks. Contact your Padgett advisor today to see if your restaurant qualifies for the Employee Retention Credit and how to start claiming your tax credit.