The COVID-19 pandemic has impacted the hospitality industry in a significant way, causing many businesses to face challenges such as decreased revenue, increased expenses, and decreased occupancy rates. In response to these challenges, the government has introduced several economic relief programs, including the Employee Retention Credit (ERC) refundable tax credit, which can provide significant benefits to hospitality businesses.

The ERC is a refundable tax credit that was introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The credit is designed to provide financial relief to businesses that have been impacted by the pandemic and incentivize them to retain their employees.

 Who is the ERC Available to?

The ERC is available to businesses of all sizes, including those in the hospitality industry, and can provide up to $33,000 per employee in tax credits. The credit is calculated as a percentage of the wages paid to employees and can be claimed for up to 50% of qualified wages paid between March 13, 2020, and December 31, 2021.

 Why You Should Apply

For businesses hit particularly hard by the pandemic, the ERC can provide significant benefits. Here are a few ways hospitality businesses can benefit from the ERC:

 Increase Cash Flow

The ERC is a refundable tax credit, which means that if the credit exceeds the amount of taxes owed, the business will receive a refund for the difference. This can provide much-needed cash flow for hospitality businesses that are struggling to stay afloat.

Reduce Payroll Costs

The ERC can offset a significant portion of the payroll costs associated with retaining employees. This can provide an incentive for hospitality businesses to retain their employees, even in the face of decreased revenue and occupancy rates.

 Invest in the Business

By reducing payroll costs and increasing cash flow, the ERC can provide businesses with the opportunity to invest in their business. This could include making upgrades to the property, purchasing new equipment, or investing in marketing and advertising to attract new customers.

 Retain Key Employees

Certain industries rely heavily on skilled and experienced employees to provide quality service to customers. For example, restaurants may hire the most experienced chefs to work in their kitchens, even if they have to pay more for their services. By providing financial relief to businesses, the ERC can help ensure that these key employees are retained and not forced to seek employment elsewhere.

 Apply Before the Deadline

Prepare for the future: The ERC is available until December 31, 2021, and can be claimed retroactively for wages paid since March 13, 2020. This provides businesses with the opportunity to receive a significant refund for qualified wages paid over the past year. This can help prepare the business for the future and provide a cushion to weather any future economic challenges.

 Hiring an ERC Consultant

To take advantage of the ERC, businesses should work with an experienced ERC consultant to ensure they are eligible and to calculate the credit accurately. They will ensure that you are eligible for the ERC tax credit, you are applying with qualified wages determined under the ERC requirements, and you are providing the IRS with proper documentation to ensure that you are approved as soon as possible. You do not want to be stuck waiting longer for approval on the ERC credit because they have questions on the information you provided in your application.

Although the deadline for ERC is not until 2024, applying as soon as possible will help you get approved faster and receive the financial relief that your business needs to sustain operations.