How Do Auto Industry Businesses Address ERTC Challenges?
The COVID-19 pandemic hit auto manufacturers and car dealerships particularly hard. Even if such businesses escaped shutting down from a government order, they likely had to contend with supply chain disruptions that threatened to grind their operations to a halt.
The auto industry faced these challenges during the pandemic. Thankfully, the Employee Retention Tax Credit (a.k.a. the Employee Retention Credit) can give businesses breathing room. Here’s what to know about the ERTC and the auto industry.
Optimizing Inventory Management and Parts Visibility
Supply chain disruptions were among the biggest problems auto businesses faced throughout the pandemic, especially if they relied on overseas parts manufacturers. Although the pandemic is slowly becoming a distant memory, supply chain issues will likely persist for some time because of demand instabilities, high labor turnover, and price fluctuations.
To overcome some of these challenges, auto companies may wish to integrate all suppliers and manufacturers into a central order and supply chain platform. This gives businesses a bird’s-eye view of the supply chain and quickly identifies potential disruptions.
Overcoming High Labor Turnover
Labor shortages will continue to be problematic for the auto sector. One reason is that many talented employees are leaving the industry for better work environments and higher pay. This leaves businesses with a smaller pool of candidates to choose from when they must replace employees.
Companies may be able to use funds from the ERTC to attract and retain desirable workers. They can use the credit to invest in training, for instance, or to improve benefits packages.
Planning for Change and Risk
In the automotive industry, one thing that remains constant is the possibility of change. Consumer demands shift like the tides, and what’s popular one day may not be the next. For example, there’s been a rising demand for electric vehicles, which could put dealerships at a disadvantage if they stock few environmentally friendly cars.
To plan for change, businesses must keep their finger on the pulse of consumer demands. They should also conduct risk assessments and put contingency plans in place with suppliers and manufacturers.
Does Your Auto Business Qualify for the Employee Retention Credit (ERC)?
The ERC is a refundable tax credit that provides eligible businesses with cash to use however they wish. If eligible, your business can claim up to $7,000 per employee per quarter for 2021 and up to $5,000 per employee for 2020. You may claim the credit for all wages paid to employees during the pandemic, including their health insurance costs.
Wondering whether your business qualifies for the ERC? The requirements are strict, and not all companies can meet them. One or both of these must apply to your business:
- You had a significant decline in gross receipts (at least 20% compared to the same calendar quarter of the prior year for 2021 and a drop of at least 50% for 2020)
- Your business had to close down, either fully or partially, in response to a government order that impacted travel, commerce, or group meetings
If eligible, claim your credit by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund with the IRS.
Let Us Help Your Business Claim This Valuable Credit
Now that you know a bit more about the ERTC and the auto industry, you may have questions about whether your business is eligible to claim the credit. If so, reach out to Dayes Law Firm at (800) 503-2000 for a free consultation.