Employee Retention Credit

Last week, the Senate passed a $1.2 trillion dollar infrastructure deal (H.R. 3684, the INVEST in America Act). The legislation has received approval after months of negotiations and leadership by President Biden and a bipartisan group of Senators. Notably, some of the money will be reallocated from rescinded, unused COVID-19 relief-related funding—including the CARES Act and the American Rescue Plan Act (ARP).

While the measure is still in effect, restaurants may still take advantage of a business relief provision called the Employee Retention Credit (ERC), which “encourages businesses to keep employees on their payroll.” Initiated with the CARES Act in 2020, the policy was extended to the end of 2021 with the ARP. 

As of now, the ERC is scheduled to run through the rest of 2021. A July 2021 Government Accountability Office noted that between March 2020 to May 2021, approximately 146,500 employers claimed $10.2 billion in credits. The same report noted delays in processing due to large volume or inquiries. 

However, Bill Smith, national director of tax technical services at CBIZ MHM’s National Tax Office, emphasized that many businesses are not aware of their eligibility. He told Inc.: “We’re seeing businesses that thought they didn’t qualify because they had more than 500 employees, or because they didn’t realize they could use their first quarter revenue loss numbers to apply in the second quarter. We’re seeing some very large credits. So it’s inconceivable to me that every business isn’t all over this.” 

As long as specific payroll wages and benefits were not paid for through Paycheck Protection Program (PPP) loan funds, employers can access upwards $7,000 per eligible employee. Restaurant operators in New York state will also be pleased to see the new Restaurant Return-to-Work Tax Credit, a $35 million program that provides a $5,000 tax credit per new worker hired with a cap of $50,000 per business. The program offers a fast-track option to claim starting August 31, 2021, for inclusion in the current tax year. Restaurants must demonstrate the following eligibility requirements

  • COVID-19-related losses of at least 40 percent in gross receipts or full-time equivalent employees
  • Hire at least one full-time employee at the business 
    • For the fast-track option, applicants must have hired the employee between April 1, 2021, and Aug. 31, 2021. The due date to submit employment data for this period is Sept. 15, 2021. A draft NYS-45 for the third quarter of 2021 will be accepted for this data.
    • For those claiming the credit on their 2021 tax return, the employee must have been added between April 1, 2021, and Dec. 31, 2021. This option will only be available if funds remain after the advance payments go out. Employment data to verify this option must be submitted by Jan. 14, 2022.

Operators interested in the NY state Restaurant Return-to-Work Tax credit should confirm eligibility with this mandatory online questionnaire. 

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