How to Maximize the ERC Tax Credit for Your Restaurant Business: 3 Simple Tips
The Employee Retention Credit (ERC) is a valuable tax credit that can help your restaurant business recover after the COVID-19 pandemic. It was specifically designed to incentivize businesses to keep their employees on payroll, even during periods of decreased revenue. This credit can be a significant help for your restaurant business, it is important to understand how to maximize this credit to get the most benefit.
The ERC was made available during the 2020 and 2021 tax years and can still be claimed today, if you haven't done so already. The ERC is a refundable credit against an employer's portion of Social Security taxes. The credit is equal to 70% of qualified wages. The maximum for this credit is up to $26,000 per W-2 employee. To qualify for the credit, a restaurant business must show that it experienced a significant decline in gross receipts. A significant decline in gross receipts is defined as a decline of more than 20% for the same quarter in the prior year.
How much could you potentially receive as a restaurant business owner? Take this scenario into consideration, a restaurant employees 10 workers. Each of these W-2 employees are paid at least $10,000 per per quarter in qualified wages. This restaurant owner could potentially receive a credit of $700,000 per quarter!
Here are some tips to help you maximize your ERC tax credit and make the application process smoother:
As a business owner, it is important to keep accurate records of all employee wages and gross receipts. This documentation is especially important when applying for the Employee Retention Credit, you will need these documents to prove eligibility.
Remember that the ERC is a refundable credit, This means that if the credit exceeds the business' tax liability, the business will receive a refund! This could be used to help to offset taxes on other income, such as rental income or investment income. You could also put this back into your business and other ways, such as purchasing new equipment, improving real estate, hiring new employees, opening a new location.. the sky is the limit.
It is highly recommended that's you consult with a tax professional that specializes in ERC to ensure compliance with tax laws and regulations not all CPAs/ tax professionals have this specialized knowledge. A specialist can assist you with gaining a full understanding of the implications of the ERC for your specific restaurant business. This will help ensure that your restaurant business receives the maximum benefits of the ERC and gets the most value from this important credit.
DAC Funds Me has partnered with a professional group of CPAs that specializes specifically and helping businesses receive the maximum ERC tax credit possible. If you would like to have your file reviewed with zero retainer feeds please click the button below to start the qualification process or to learn more.