ERC credit has been through many changes, so the businesses that were not eligible at the start can now qualify. Majorly this applies to the restaurant business. Because of certain obligations, most restaurant businesses couldn’t qualify for the ERC back then. Still, now it’s time to start calculating the payroll wages again and apply for the ERC again.
If you don’t know about the changes made in the ERC and how these changes may turn out to be on your side, here is how.
Supply Chain Disruptions
Restaurants depend on the supply chain to keep running their business operations. For example, they need regular supplies of veggies and meat. Because of the pandemic restrictions, it becomes nearly impossible to keep running this supply chain. And it resulted in a significant loss for the restaurant’s business.
Supply chain disruptions were not included in the small business tax relief or ERC qualification criteria when it first came out. As a result, restaurant businesses failed to prove themselves as eligible. But after some amendments, the IRS included the supply chain disruptions in the ERC qualification requirements. Now, the restaurant business that has paid the wages to their W2 employees during the calendar quarter of 2021 can apply for the ERC based on supply chain disruptions.
The Number Of Full-Time Employees
The second thing that has changed in the ERC and can benefit the restaurant business is the number of full-time employees.
In 2021, a business with fewer than 100 full-time employees could only qualify for the ERC. So, because restaurants also have part-time employees, and they can be aggregated as full-time employees in their W2 form, most restaurant businesses failed to qualify for this ERC requirement. And back then, ERC was new to everyone. It wasn’t easy to look for good ERC guidance.
But, after the IRS made changes to this requirement and increased the number of employees to 500. So, now the business with less than 500 W2 employees can also qualify for the ERC, which makes a great opportunity for the restaurant business. They can now count the wages paid to their part-time employees when aggregated as full-time employees.
Also, if a restaurant has less than 100 employees, they can count the wages to pay both working and non-working employees during the calendar quarter of 2021. However, if a restaurant business has between 100 to 500 employees, they can only count the wages paid to their working employees.
Gross Receipt
Another way to qualify for the ERC is by looking at the Gross receipt. If you are a restaurant owner and have faced more than 20% declination in your gross business receipt, you can apply for the ERC.
When the IRS first published the guideline, they included all the tax-exempt incomes into the gross receipt criteria, and the significant declination was considered 50%. So, the restaurant business that had claimed the PPP loan failed to qualify the gross receipt criteria.
But now they can also try to apply again. They can calculate all the wages that were exempted while applying for the ERC.
Tips
Restaurants can also count the tips paid to their employees for more than $20 per month.
Also, if the employer has claimed the credit but did not include the tips in their claim credit. Then, in that case, they can file for the amended tax returns to claim the credit. But to claim the credit based on the tips, the employer must report the tips as income on the employee’s form W-2
Conclusion
Changes in ERC have given the employer a second chance to apply for it. Now, they can apply for the ERC based on the supply chain disruption, decline in the gross receipt, number of W-2 employees, and tips received by the employees.
ERC Specialists can help you apply for the ERC. They are the best ERC customer service field. They can guide you through calculating all the wages and sorting out the complexities of applying the ERC.
If you are interested, visit their website. And submit the necessary documents. Once they analyze how much of the credit you can receive, they will get back to you. And once you approve the application and amount, they will continue and send your details to the IRS. So, what are you waiting for? Visit the ERC specialists, and claim the credit now.
