Did you know the IRS made changes to the rules around the Employee Retention Credit (ERC) during the past year? Many businesses have assumed they are not eligible when they likely are. If you have not consulted your tax professional, you may be missing out on this substantial credit. For instance, you are now allowed to participate in the PPP and take the Employee Retention Credit (Employee Retention Credit) retroactively to 2020. And, there are no restrictions on how you spend the money; this is the return of funds you’ve already paid into the system.
Earlier this month, Hospitality Minnesota members were invited to participate in a webinar with Nick Swedberg of Boyum Barensheer. Members can access it through the Hospitality Minnesota Member Portal, along with the slide deck and a couple of eligibility flow charts. Briefly, here is a high level and simplified view of the changes.
For the 2020 tax year, qualifying businesses experienced gross receipts down by 50% from the prior year in a quarter or were shut down by government order during a quarter. Qualification for the credit is determined quarter-by-quarter, and you can receive a credit – calculated at 50% – of up to $10,000 per year per employee.
If you did receive relief under the Paycheck Protection Program (PPP), you will want to use extreme caution in calculating the credit you can take. There is no double-dipping allowed. You cannot use the same wages used for PPP forgiveness and the ERC. Qualifying business has gross receipts down 50% from prior year in a quarter OR if the business was shut down during a quarter by government order
In the 2021 tax year, you are now allowed to take the second PPP draw AND take the ERC. To do so, gross receipts must have been down 20% in a quarter, from 2019 levels or limited by government order. And while the restrictions around counting the same wages for PPP loan forgiveness and the ERC remain, the qualifying wage amount went to from $10,000 annually to $10,000 per quarter per employee, and the credit amount is now calculated at 70% instead of 50%.
The ERC is available to any type of hospitality business, so long as it meets the eligibility requirements. There are, of course, a variety of special considerations related and complexities driven by the business classification and the full tax liability profile. The on-demand video is a great place to get started to get organized for a conversation with your tax professional. You can also access the slide deck and eligibility flow charts.
For more information or questions, contact Nick Swedberg, CPA and Partner at Boyum Barenscheer, at 952.858.5585 or firstname.lastname@example.org. Or, refer to our Vendor Directory to find other Allied member tax professionals.
Note: The information contained herein should not be construed as legal, accounting, or tax advice. The commentaries provided are the opinions of Boyum Barenscheer PLLP and are for informational purposes only. While the information is deemed reliable, Boyum Barenscheer cannot guarantee its accuracy, completeness, or suitability for any purpose and makes no warranties with regard to the results to be obtained from its use, or whether any expressed course of events will actually occur. The user should contact his or her Boyum Barenscheer or other tax professional prior to taking any action to ensure the user’s unique facts and circumstances are considered prior to making any decisions.