The Employee Retention Credit is a refundable tax credit that was created during the pandemic for employers who experienced difficulties in 2020 and 2021 due to COVID shutdown orders and related economic disruptions. Dominion wanted to get the word out to restaurant owners and make sure they take advantage of this little-known tax credit as they could qualify for up to $26,000 per employee. Even if businesses have applied for and received PPP loans, they are still eligible for ERC. In fact, unlike PPP assistance which had a limited pool of funds, any ERC-eligible company is legally entitled to this money.
As a general rule, our company recommends that any restaurant that has more than five employees and has experienced any type of difficulty during the pandemic be formally assessed by a qualified tax professional. From what Dominion has discovered so far, if a restaurant has received a PPP, it is likely to qualify for the ERC. The potential benefit of such a large credit is worth considering, and as this credit will be phased out in April 2023, there is a limited window to file a claim. If you are unsure of your eligibility, be sure to find out because you may have a winning lottery ticket in your pocket that you are not cashing in.
One of the reasons so many businesses are unaware of the existence of this credit is that it is a payroll tax credit and not an income tax credit. As a result, many CPAs don’t pursue it because it’s a separate, one-time program and they haven’t familiarized themselves with it. It’s a perfect storm where the companies payroll company thinks the CPA is going to handle it, while the CPA thinks the payroll company is going to handle it. In reality, no one cares and hundreds of thousands of dollars or more are left on the table.
The total time most restorers who work with us have to spend on this process is less than three hours. For a tax credit that could amount to hundreds of thousands of dollars, there aren’t many other income-generating activities you can do that offer such a high return over time.