The Employee Retention Tax Credit (ERTC), a Covid-19 recovery financial assistance tool for small businesses, remains open and has undergone some recent changes. Businesses applying for ERTC based on 2020 wages must have 100 or fewer employees and was subject to a full or partial suspension of operations by a government order or a 50 percent or greater decline in gross receipts compared to 2019. The credit can be up to 50 percent of $10,000 in wages, or $5,000 per employee.
In 2021, businesses with 500 or fewer employees qualify for the credit if they were subject to a full or partial suspension of operations by a government order or a 20 percent or greater decline in gross receipts compared to the same quarter in 2019. The credit can be up to 70 percent of $10,000 in wages, or $7,000 per employee per quarter for a maximum credit of $28,000 in 2021.
In both cases, ERTC is available for businesses that have received a Paycheck Protection Program (PPP) loan, but the credit cannot be claimed on wages that were used to support PPP loan forgiveness. So, if you used a PPP loan to pay the entirety of an employee’s wages, you cannot claim an employee retention tax credit on that same employee’s wages.
To apply for the ERTC, owners should report qualified wages and the amount of credit they’re entitled to on their businesses’ IRS form 941 or 943, whichever they use for their federal tax returns. Businesses may also apply for an advance payment of the credit by filing IRS form 7200 and the advance will be subtracted from the rest of the credit once it’s received. For more information be sure to check out NFIB.
For New York City based restaurants and bars still feeling the economic impacts of Covid-19, The Restaurant Return-to-Work Tax Credit may offer some relief. Qualifying businesses are eligible for a tax credit of $5,000 per new worker hired, up-to $50,000 per business. The Program is open to eligible restaurants located in New York City, or in an area outside of New York City that was designated an Orange or Red Zone for at least thirty consecutive days.