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To assist hospitality businesses and those in other industries financially affected by the pandemic, the U.S. government introduced the Employee Retention Credit (ERC). A refundable payroll tax credit included as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), the ERC was created to encourage eligible employers to keep their employees on the payroll during the pandemic.
What does this mean for employers at hotels/motels, resorts, vacation rental businesses, convention centers, travel agencies and similar businesses? If your business is eligible, you can receive up to half of the qualified wages paid to your employees for the tax year 2020. For 2021, that percentage increased to 70 percent.
Example: Florida, March 19, 2020 – Miami Beach Mayor Gelber announced that all hotels in the city must be closed by 11:59 PM on Monday. The city is also implementing a curfew from midnight to 5:00 AM beginning on March 24. County officials stated they are considering county-wide hotel closures.
Find More Government Orders Specific to Your State on Our Insights Page
Check out these FAQs to learn more about qualifying and applying for the Employee Retention Tax Credit.
How Does the Employee Retention Credit Help Businesses in the Hospitality Industry?
Many hospitality employers had to implement new hygiene standards and protocols during the COVID-19 pandemic to ensure guest safety, often an expensive process. The ERC gives eligible businesses the opportunity to invest more in their operations, including the maintenance of such health and safety measures.
How Do I Know if My Hospitality Business is Eligible for the ERC?
There are two main ways to be eligible for stimulus refunds:
- If your business matches the required decline in revenue within any quarter of 2020 or 2021.
- If you have W-2 employees.
For How Much of a Tax Credit Might My Business Be Eligible?
For 2021, the ERC is a quarterly tax credit of 70 percent of the first $10,000 in wages per employee in each quarter of 2021 from January to September 2021 (capped at $7K per employee per quarter).
What Exactly Is a Significant Decline in Gross Receipts Under the Employee Retention Credit program?
When Does the ERC Program End?
For all four quarters in 2020, the deadline to apply is April 15, 2024; for all quarters in 2021, the deadline is April 15, 2025.
How Do I know Which COVID-19 Governmental Orders Were Enacted in the State Where My Hospitality Business is Located?
Is the Employee Retention Credit the Same as the Paycheck Protection Program (PPP)?
How Do I Apply for the Employee Retention Credit?
If this sounds confusing, that’s because it is – even for seasoned tax professionals. If you are unsure about how to file a Form 941-X amendment for the ERC credit or need assistance preparing and submitting your application, consider working with one of our experienced tax professionals. Here at StenTam, our tax specialists can guide you through the process and answer any questions you may have along the way. We even have resources that enable you to track your refund. Contact us today to get started!
Qualifying orders (From IRS)
What kind of government orders qualify my business or organization for the ERC? (added July 28, 2023)
Examples of governmental orders:
- An order from the city’s mayor stating that all non-essential businesses must close for a specified time period;
- A state’s emergency proclamation that residents must shelter in place for a specified period, except for essential workers;
- An order from a local official imposing a curfew on residents that impacts the operating hours of your trade or business for a specified time period;
- An order from a local health department mandating a workplace closure for cleaning and disinfecting.
Can I rely on a recommendation, bulletin or statement issued by a government authority to qualify for ERC? (added July 28, 2023)
Recommendations or statements encouraging you to take certain actions are not orders.
If you use a third party to calculate or claim your ERC, you should ask them to give you a copy of the government orders – not a generic narrative about an order. Read the order carefully and make sure it applied to your business or organization.
Is being subject to a government order enough to make me eligible for ERC? (added July 28, 2023)
What does it mean to be fully or partially suspended? (added July 28, 2023)
Some examples of who doesn’t qualify under this eligibility factor:
- If all your employees were able to telework during the pandemic and your business continued to operate, your business wasn’t suspended.
- If your customers were affected by a stay-at-home order, but no orders applied to your business operations, you weren’t suspended.
- If you voluntarily closed your business or reduced hours of operation, you weren’t ordered to suspend.
You could still qualify for ERC based on a decline in gross receipts even if you don’t qualify under suspension of operations due to government order.
Was my business or organization fully or partially suspended if I had a supply chain issue? (added July 28, 2023)
The IRS provided a narrow, limited exception if an employer was not fully or partially suspended but their supplier was. However, it applied only when the employer absolutely could not operate without the supplier’s product and the supplier was fully or partially suspended themselves.
In addition to having the supplier’s governmental order, you will need to show that:
- The government order caused the supplier to suspend operations,
- You couldn’t obtain the supplier’s goods or materials elsewhere (regardless of cost), and
- It caused a full or partial suspension of your business operations.
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