The Employee Retention Credit (ERC) is a valuable tax relief program provided by the IRS to support businesses, including restaurants, during challenging economic times. By providing eligible employers with a refundable payroll tax credit, the ERC helps businesses retain their workforce and maintain operations. 

In this ERC guide specifically tailored to restaurants, we will outline the key aspects of the ERC, discuss its benefits for restaurant owners, and provide a step-by-step approach to maximize the credit’s advantages.

Do I qualify for Employee Retention Credit? 

To qualify for the Employee Retention Credit, restaurants must meet one of the following criteria:

1. Significant Decline in Gross Receipts: A 50% decline in gross receipts during a quarter, when compared to the same quarter in the previous year.

2. Government-Ordered Shutdown: Experiencing a full or partial suspension of your restaurant operations due to a government order related to COVID-19.

Determining Qualified Wages for Restaurants 

The amount of ERC an employer can claim depends on the amount of qualified wages paid to employees. Qualified wages include:

– Regular pay, commissions, and bonuses

– The cost of providing health benefits

For businesses with more than 100 employees, only wages paid to employees not providing services due to COVID-19 related circumstances can be considered for the credit. For businesses with 100 or fewer employees, all employee wages qualify, regardless of whether the employee is providing services or not.

Calculating the Employee Retention Credit for Restaurants

The amount of ERC a restaurant can claim depends on the following factors:

– The number of employees

– The amount of qualified wages paid

– The applicable percentage for the specific period

The applicable percentage may vary depending on the time frame:

– 2021: 70% of qualified wages paid between January 1, 2021, and December 31, 2021.

The maximum credit a restaurant can claim per employee is $7,000 per quarter in 2021

How to Claim the Employee Retention Credit?

To claim the ERC, Restaurants must:

1. Calculate the credit amount based on the qualified wages paid.
2. Reduce the employer’s portion of Social Security taxes by the credit amount.
3. Report the ERC on the employer’s quarterly employment tax return (Form 941).

Amending Prior Returns

If a restaurant figures out they were eligible for the ERC in previous quarters but didn’t claim it, they can amend their employment tax return (Form 941-X) to claim the credit retroactively.

Strategies for Restaurants to Maximize the ERC Benefits

Retain and Train Employees

By retaining current employees and investing in their training, restaurant owners can not only maintain a stable workforce but also increase the amount of qualified wages eligible for the ERC.

Monitor and Adjust Staffing Levels

Consult with Experienced Tax Professionals Who Specialize in the ERC 

Working with a tax professional can help restaurant owners navigate the complexities of the ERC and ensure they are claiming the maximum possible credit. Tax professionals can also provide guidance on other tax credits and incentives that may be available to restaurant owners. 

Our Former IRS Agents have filed 100s of ERC Tax Credits while working in the IRS and are standing by to help you. 

The Employee Retention Credit is a great tool for restaurant owners who are looking for financial relief during continued difficult economic times. By understanding your eligibility, calculating the credit amount accurately, and implementing strategies to maximize their return, restaurants can reinforce their financial stability and invest in the future for long-term success.

Make sure you work with only seasoned tax attorneys who specialize in the ERC like our exclusive former IRS Agents.

You get you the maximum return with an industry-leading audit guarantee.

Our agents have filed 100s of these claims while working for the IRS.

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