The pandemic changed the way we operated our businesses. Retaining employees through the lockdowns...
Exploring the ERTC Incentive
Franchisees can easily avail themselves of the complete benefits of the ERTC for both years 2020 and 2021, provided that the concerned eligible wages were not accounted for under the Paycheck Protection Program.
An employer can easily get up to $5,000 for each eligible employee from 2020 and up to $7,000 for each eligible employee for each quarter of 2021. Summed up, restaurant owners can get a handsome $26,000 for each employee under the Employee Retention Tax Credit federal incentive.
This article discusses the details of the ERTC and how it can, or already has helped many fortunate business owners during the years economically stunted by COVID.
Checking For ERTC Eligibility
Whether they are eligible to claim the ERTC remains a major confusion amongst many owners regarding this tax incentive. To simplify things, we have thoroughly listed eligibility requirements that need to be met if you are looking to apply for the ERTC.
Eligibility Requirements For Employers
Two major categories exist for eligibility in terms of the number of employees:
- Employers with 100 or fewer employees who work on premises can claim the ERTC for 2020
- Employers with 500 or fewer employees who work on premises can claim the ERTC for 2021
Note that an employee will be accounted for as a full-time employee if they worked at least 30 hours per week or 120 hours in a month during 2019 before COVID-related changes were introduced in the private sector.
If eligibility has been met, full-time employees are counted by taking the sum of full-time employees working each month after the business began and dividing it by the number of months the business remained functional.
In the case of franchises being run by a group of employers, the collective is considered, and all the employees working under this group of people will be accounted for under a single individual's wage bill.
Circumstances To Be Met For Eligibility
The following conditions must also be met if a business intends to claim the ERTC.
- Operations for the business are fully or partially halted due to government-sanctioned closure
- A business shows a sizeable decrease in revenue generation compared to the same quarter in 2019
We will go through the details of what levels of closure refer to.
Decrease In Capacity Due To Social Distancing
Many restaurants could not function at full capacity due to social distancing protocols mandated by the government. This allowed business owners to continue with indoor and outdoor dining services, but they had to maintain a six feet distance between each table. This meant that some restaurants could not function at full capacity. A decline in the number of customers a restaurant can cater to at a time due to COVID restrictions is included hindrance to regular operations due to COVID-related policies.
Closure Of Indoor Dining Only
Some restaurants were allowed to continue with their dining services in an outdoor environment. Indoor dining halls were instructed to be closed. This also results in fewer customers that can be catered to and will be included in the disruption of operations due to the pandemic.
Complete Stop To Dining Services
At a tertiary level, restaurants may have been instructed to halt dining procedures indoors or outdoors completely. Only takeaway or drive-through services were allowed. This, too, classifies as a disturbance of operations due to COVID restrictions, and the franchisee can file for the ERTC on this basis.
If any business owner had their franchise impacted in one or more of these manners, they are eligible for the ERTC and can file for a credit refund.
Exploring this subject can seem difficult, so why not have an explore companion? A TPG ERTC specialist can help you on your ERTC journey!
Call 909.724.4401 today and schedule a free consultation for all your questions or concerns.
Added ERTC Provisions
Payments In Advance
Businesses were permitted to decrease employment tax deposits when expecting ERTC for eligible pay using Form 7200. Only small businesses with 500 or fewer employees in 2019 can make advance ERTC payments for 2021, which go up to 70% of the employer's 2019 calendar year's typical quarterly compensation.
Grants For Restaurant Revitalization
Payroll is a permissible expense for qualified organizations that receive a Restaurant Revitalization Grant from the U.S. Small Business Administration in the calendar year 2021. The entity might not be eligible to receive ERTC for this payroll expense if it uses grant money to cover payroll costs.
Certain criteria need to be met for each employee on a franchisee's wage bill to make their wages eligible for being filed under the ERTC and getting a credit refund.
Not all employees who have worked for an employer during the COVID phase can be eligible for inclusion in an ERTC application. Primarily, the employee must still be on the payroll. An employee who has had their contract terminated but also has overdue wages will not be accounted for under the ERTC. Furthermore, certain working hour requirements must be met, which makes an employee a full-time employee as mandated by ERTC requirements. Only full-time employees can avail themselves of the benefits of the ERTC.
Why Have Franchisees Missed Out On the ERTC?
Since its introduction in the CARES Act of 2020, many employers have failed to file their business for the ERTC incentives due to a lack of awareness and information regarding the tax incentive. This has led to many franchisees missing out on sizeable sums of money that could have helped them sustain their businesses much better during the pandemic phase.
File For the ERTC If You Haven’t Already
The government continues to accept ERTC applications for businesses impacted by the COVID-19 pandemic in recent years, provided they can provide the necessary details.
The credit refund available through the ERTC can allow many employers to keep their businesses running healthily. Over recent years, many businesses suffered severe losses or were completely shut down due to a severe lack of revenue, with many employees losing out on much-needed jobs.
If you happen to be another franchise owner suffering from the aftermath of COVID-related economic instability in the private sector, consider filing for the ERTC for restaurants and getting your business back on track.