It has been an especially difficult couple of years for restaurants and hotels. The year 2020 was riddled with quarantines, mandates, and apprehension about the unknown. In 2021, the supposed “Year of Recovery,” two new COVID variations arrived, putting pressure on every business, particularly hospitality.
The ERTC was created as an aid to help businesses keep staff on the payroll. This assists organizations in dealing with the epidemic. So, hotels and restaurants claim your ERTC funds now.
The Employee Retention Tax Credit is a refundable tax credit against some employment taxes that Congress introduced as one of the many COVID recovery stimulus programs. Certain employment taxes are equivalent to 50% of qualifying wages paid to employees by an eligible company after March 12, 2020, but before January 1, 2021, and 70% of qualified wages received between January 1, 2021, and October 31, 2021. During this time, qualifying employers might receive immediate access to the credit by decreasing the employment tax payments they were otherwise obliged to make.
But the IRS’s delayed advice and the ERTC’s enormous complexity rendered this option inaccessible for many restaurant companies. Fortunately, the ERTC can be claimed up to three years after you have received the wages. But many firms are either ignorant of the ERTC or have failed to take advantage of this crucial program.
When asked why they haven’t applied, almost half of those polled said they “don’t know if our company qualifies”. Nearly one-fifth were “unsure” if their company took advantage of tax breaks. Tax incentive programs can be intimidating and complicated. But, the survey findings show significant wasted possibilities, particularly for restaurants and hotels. The ERTC can give the amount a business could make in three, four, or even five years.
Employers that obtained PPP loans and had their debts forgiven can now claim the Employee Retention Credit on salaries not covered by PPP loans. Despite the change in ERTC criteria, many qualified establishments still fail to claim this credit. This is usually due to a lack of information.
These restaurant and hotel owners are either ignorant of this credit or proactively disqualify themselves. Often this is because they believe they are ineligible for it. These companies are foregoing credits that they could have utilized. For what? To reduce payroll taxes, invest capital, hire additional employees, and rebuild their operations.
To be eligible for this tax credit, you must meet at least two conditions. First, your company activities were entirely or partially stopped or halted. Second, your firm incurred a revenue decrease of 20% or more compared to the same quarter in 2019. You may be eligible for a cash refund even if you have no tax due. In reality, the key to qualifying isn’t simply revenue or tax liability. If the pandemic disrupted your everyday activities due to the pandemic, you’re in a great position to claim the credit.
Even if your company expanded during the epidemic, you might be eligible for the Employee Retention Credit. If you can demonstrate how the pandemic affected your company and its operations, this incentive will undoubtedly deliver a much-needed boost to your company.
Finally, restaurants and hotels should not only claim this credit but also combine it with other government incentives, such as the Work Opportunity Tax Credit (WOTC). This incentive encourages firms to hire workers from selected groups that have traditionally experienced major hurdles to employment while helping maintain businesses and restart the American hospitality industry’s recovery.
The Employee Retention Credit is a fantastic chance to assist your business get back on its feet and creating a solid foundation for success once restaurants and hotels resume normal operations.
If you have already received other types of grants, aid loans, etc. you are eligible for ERTC. Employers should also remember that the ERTC is accessible even if they have already received other governmental aids. If their firms began after February 2020, they might be eligible for up to $100,000 in refundable credits for 2021 under particular ERTC conditions.
Also, unlike PPP, ERTC is not a loan that must be repaid or forgiven; rather, it is a check from the Department of Treasury for up to $26,000 per employee to assist your firm following the turbulence of the previous two years. Many local, state, and federal government directives have curtailed various typical company activities in the hotel industry. You might be one of many firms eligible for this substantial assistance program. Most CPAs and tax professionals have the time to learn about the ERTC program’s many components. They are concerned with the ERTC and ensuring you receive the greatest credit. With the passage of these two pieces of advice, which answered practically all of the remaining concerns, there is little incentive to continue delaying, especially given the IRS’ lengthy processing period.
Don’t be concerned. Even if you are discovering the Employee Retention Tax Credit, you still have until mid-2023 for the 2020 and 2024 for the 2021 credits. There are many moving parts, so unless you are a tax specialist, you will need the assistance of a professional. Due to the complexities of Notice 2021-49 and the inclusion of tips, you should consult with a tax counsel specializing in restaurants and hotels. Every day, the IRS trains auditors to examine ERTC clients for problems. It is critical to ensure that your ERTC is appropriately submitted; otherwise, you may be subject to an audit. The bottom line for all restaurant and hotel employers/owners, don’t dismiss ERTC as something you cannot access because you didn’t get professional advice or utilize the proper evaluation method in your restaurant or hotel’s analysis. You earned the ERTC, and the credit is significant, especially because COVID-19 continues to impact revenues. So, hotels and restaurants, claim your ERTC funds now.
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