The Employee Retention Tax Credit, or ERTC, can bring serious relief to businesses that struggled during the COVID-19 pandemic. Businesses eligible for the ERTC could claim a maximum credit of up to $21,000 for qualified wages paid to employees ($7,000 per employee per quarter for 2021).
But what types of businesses qualify for the ERTC? Is yours one of them? Find out below.
Examples of Qualifying Businesses
If the pandemic impacted your business, there’s a good chance it qualifies for the ERTC. Below are a few examples of businesses eligible for the ERTC and how they may qualify.
Daycare Centers and Preschools
Daycare centers, preschools, and similar businesses all dealt with shutdowns during COVID-19. If you own such a business, each parent who couldn’t drop off a child meant lost revenue for you.
Even if your business didn’t shut down, many parents were reluctant to leave kids at daycares over the possible risk of infection. Moreover, the government may have restricted how many children you could have per class.
If your daycare or preschool shut down or experienced a drop in enrollment because of a partial suspension of operations, you may qualify to claim the ERTC.
Restaurants and Bars
Restaurants, bars, and breweries were among the hardest-hit businesses throughout the pandemic. That’s true even if the government didn’t order you to close down. You may have had to increase the spacing between tables, and limit how many customers you could serve.
Or maybe you had to close your dining room and limit customers to outdoor seating. Not many customers were likely to enjoy an outdoor meal during the freezing winter or scorching summer months.
If your restaurant closed down (either partially or fully) or had a serious drop in gross receipts, your business could be eligible for the ERTC.
Hotels and Motels
Travel restrictions have heavily impacted hotels and motels in the past few years. Even if the government didn’t shut down travel in your area, very few people wanted to take vacations and risk infection by staying in a hotel. If your hotel has a restaurant or bar, as many do, it may have also had a drop in revenue.
Does your business own vacation rental properties? If you had a drop in gross receipts due to a lack of guests, you might qualify for the ERTC.
Nonprofits
Tax-exempt organizations and nonprofits typically don’t qualify for federal tax credits, so if you run one, you may not have bothered to apply for the ERTC. However, that’s a missed opportunity because the government also allows nonprofit organizations to claim this valuable credit.
If your nonprofit lost funds because it couldn’t hold fundraisers or other events, it could meet the IRS gross receipts test.
Eligibility Requirements
To claim the credit, your business must meet one of these requirements:
- The government ordered it to shut down, either partially or fully
- Your business had a major drop in gross receipts
What counts as a “major drop” differs for 2020 and 2021. For 2020, eligible employers must have had at least a 50% drop in gross receipts compared to the same calendar quarter in 2019. For 2020, you need at least a 20% decline.
Reach Out to Dayes Law Firm PC To Determine Whether You Qualify
Businesses eligible for the ERTC need to act fast to claim it. You only have until April 15, 2024, to claim the credit for 2020, and if you want the ERTC for 2021, the deadline is April 15, 2025.
Not sure if you own a qualifying business or meet eligibility requirements? Call Dayes Law Firm PC at (866) 257-1223 for a free consultation today.