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Retail businesses are the backbone of the American economy. StenTam’s team of tax professionals can help you identify and claim local, state and national tax credits to help you sustain and grow your business.
Trends in consumer spending change like the seasons. Retailers are aware of this and proactively plan for those changes. Sales forecasting, assortment planning, market segmentation and inventory management are all a big part of this process.
Like almost every industry, though, retail was certainly not prepared for the COVID-19 pandemic.
Even though e-commerce sales skyrocketed by nearly 30 percent, many retailers — especially those with physical storefronts — dealt with supply chain disruptions and delays, a dwindling workforce, store closures and quick shifts in consumer behavior.
There is good news for businesses in the retail industry — in the form of a payroll tax credit introduced by the United States government. You might have already heard about the Employee Retention Credit (ERC), which was included as a component of the Coronavirus Aid, Relief and Economic Security Act (CARES Act).
What’s the idea behind the ERC? Basically, was initially offered to eligible businesses to encourage eligible them to keep their employees on the payroll during the pandemic. That means that if your business qualifies for the Employee Retention credit, you could receive a check for up to $26,000 per employee in tax credits.
Tennessee, May 21, 20202 – Nashville and Davidson County will enter Phase 2 of the Roadmap for Reopening Nashville on Monday, May 25, 2020. On May 25, retail stores, commercial businesses, and restaurants may reopen at 75% capacity. Restaurants and bars must remain closed, but live entertainment with no more than two performers at a time is permitted with proper social distancing. Gyms, recreation facilities, museums, nail salons, hair salons, and tattoo parlors may open at half capacity. Socially driven businesses such as bars and clubs remain closed. Gatherings of up to 25 people are permitted. Residents 65 and older and high-risk individuals should remain at home. All residents should wear masks in public, and those with the ability to work from home should continue to do so.
Find More Government Orders Specific to Your State on Our Insights Page
How do you know if your retail business is eligible for the ERC? 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 Retail Industry?
How Do I Know if My Retail 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 Retail 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?
Are you unsure about how to file a Form 941-X amendment for the Employee Retention Tax Credit? Do you need assistance preparing and submitting your application? If so, reach out to one of the experienced tax professionals here at StenTam. We’ll not only guide you through the process but also ensure you get all the credit for which you’re due, all while maintaining compliance and minimizing risk.
Qualifying orders (From IRS)
What kind of government orders qualify my business or organization for the ERC? (added July 28, 2023)
To qualify for ERC, you need to have been subject to a qualifying government order related to COVID-19 that caused a full or partial suspension of your trade or business operations. The government order may be at the local, state, or federal level.
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)
No. To qualify for the ERC, you must have been subject to a government order that fully or partially suspended your trade or business.
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)
No. You need to demonstrate that the government order was related to COVID-19 and that it resulted in your trade or business being fully or partially suspended.
What does it mean to be fully or partially suspended? (added July 28, 2023)
Whether your business or organization was fully or partially suspended depends on your specific situation. For examples, see Notice 2021-20, Part III, Section D.
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)
A supply chain issue, by itself, does not qualify you for the ERC.
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.
Client Case Study
Small, family-owned businesses were strongly impacted by the pandemic and the accompanying government-mandated shutdowns. A Pennsylvania-based automotive service provider struggled as these shutdowns made it more difficult to keep their...Read More
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