The employee retention tax credit was created through the Coronavirus Relief, Relief and Economy Act (the CARES Act) to help counter these negative impacts and support companies in their employee retention efforts during such a tumultuous time. With so many business owners struggling to retain their employees, we saw many companies explore expanding their employee benefits or launching employee incentive programs. Think of the ERTC as how the government complements these employee retention tools and helps companies recover from the immense impact of the pandemic. The employee retention tax credit is essentially a refundable payroll tax credit that companies can request on the salaries of eligible employees, including qualifying health plan expenses, paid to their employees.
Do you want to improve your employee appreciation program this year? Now that we know the benefits of the employee retention tax credit and the high-level qualification parameters, let's look at some examples of the ERTC. Some common examples of companies with more than 500 employees include distribution companies, hotels, and technology companies. While the employee retention tax credit was created to support small and medium-sized businesses, larger companies can still apply for the ERTC, but it's a longer process and payroll costs cannot be included. The tax credit per employee is also less than the amount available to small businesses.
As a result, we saw how many food service companies closed or studied how to sell their businesses to recover their losses. The employee retention tax credit helps reward and support companies that were able to stay open and to keep their employees on the payroll. Most people avoided non-essential travel and chose to stay at home or stay in the area instead of going to a destination. With this dramatic decline in travel, the hospitality industry worked immensely to keep its businesses afloat and its employees on the payroll.
Many franchises are restaurants, so they experienced an impact similar to that of the general foodservice industry described above. Another common franchise affected are gyms and fitness centers. While nonprofit organizations may not be the first industry that comes to mind when we think of companies that qualify for ERC, many nonprofit organizations do qualify for credit. Once reopened, restrictions on capacity and hours of operation continued to limit revenues from non-profit operations by 26%, so these organizations qualified for the employee retention tax credit.
In some cases, if a non-profit organization had problems with its suppliers as a result of government policies, that could be another reason to obtain the ERTC qualification. Recreational facilities, such as parks or recreation centers, are another common industry that qualifies for the employee retention tax credit. During the pandemic, especially during the closing mandates, most of the public stayed at home instead of venturing out to recreational facilities, which caused a drastic decrease in foot traffic in these places. Even after restrictions and closures were eased, people were still hesitant to return to these facilities, adversely affecting revenues.
As expected, gyms and fitness facilities are one of the top industries that qualify for the employee retention tax credit. While we saw a massive increase in sales of gym equipment for home use during the pandemic, we saw an equally massive decline in gym memberships. Gyms made an effort to stay open and retain their staff during this tumultuous period of time. Finally, many day care centers and preschools had difficulty hiring and retaining staff, which had a direct impact on the number of children they could support and on the company's overall revenues.
Transport companies are another of the industries that best qualify for ERTCs, since they were significantly affected during the COVID-19 pandemic. Save my name, email, and website in this browser for the next time I comment. Fun virtual team building activities The best employee recognition software platforms Truly awesome gifts for co-workers Ideas for company gifts Employees really want unique gifts for employeesCorporate gift ideas Your customers and customers will love them. Strictly necessary cookies must be enabled at all times so that we can save their cookie settings preferences.
This website uses Google Analytics to collect anonymous information, such as the number of visitors to the site and the most popular pages. Keeping this cookie enabled helps us to improve our website. Small employers receive greater benefits under the ERC regime. Specifically, for as long as they are an eligible employer, they can include wages paid to all employees.
Large employers can only include salaries paid to employees for not providing services. Technically, yes, but you only pay salaries that meet the requirements while the terms of office are in effect and have a more than nominal impact on the company. Instead, the employer must reduce wage deductions on their income tax return for the tax year in which they are an eligible employer for the purposes of the ERC. The employee retention credit is a fully refundable tax credit that eligible employers request to cover certain payroll taxes.
It's not a loan and doesn't have to be repaid. For most taxpayers, the refundable credit exceeds the payroll taxes paid in a credit-generating period. While an employer cannot include salaries financed by a PPP loan in the ERC calculation, PPP funds only apply to eight to ten weeks of wage expenses. ERC eligibility periods are longer.
PPP loans can also finance non-wage expenses. No, but, if possible, allocate the maximum allowable non-wage costs to the waiver of the PPP. It is likely that the fund's sister holding companies can be treated as separate operations or businesses when considering the status of an eligible employer, since the Fund owned by the holding companies is not an active operation or business (rather a passive investment vehicle). Cherry Bekaert LLP and Cherry Bekaert Advisory LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations and professional standards.
Cherry Bekaert LLP is an independent, certified public accounting firm that provides certification services to its clients, and Cherry Bekaert Advisory LLC and its subsidiaries provide tax and business advisory services to their clients. Cherry Bekaert Advisory LLC and its subsidiary entities are not authorized public accounting firms. The entities that belong to the Cherry Bekaert brand are independently owned and are not responsible for the services provided by any other entity that provides services under the Cherry Bekaert brand. Our use of the terms “our firm” and “we” and terms of similar meaning denote the alternative practice structure of Cherry Bekaert LLP and Cherry Bekaert Advisory LLC.
The ERTC was created to help small and medium-sized businesses recover from the enormous financial and personnel effects of COVID-19, so it's no surprise that many of these small businesses qualify for the employee retention tax credit service. The Employee Retention Credit (ERC) is a fully refundable tax credit that employers can apply for if they keep employees on the payroll. The employee retention credit is available to churches and other religious organizations that were affected by capacity restrictions imposed by the government for meetings or that experienced a significant decrease in their gross revenues. For some business owners who are struggling to make ends meet during the coronavirus crisis, a tax credit such as the employee retention credit might be easier to access than other popular aid options, such as loans and grants.
The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. Like the restaurant industry, the hotel industry (26% of its employees) was severely affected by the pandemic and, as a result, is another major industry that can qualify for the employee retention tax credit. Remember that you can apply for this credit quarterly, so come back here to calculate the amount of your credit for the next calendar quarter. Fun virtual team-building activities The best employee recognition software platforms Truly awesome gifts for coworkers Ideas for business gifts Employees really want unique gifts for employees Corporate gift ideas that their customers and customers will love.
For more information on the employee retention credit, visit Cherry Bekaert's ERC Guidance Center or contact Martin Karamon. . .