Employee Retention Credit for Restaurants

January 4, 2023
Written by Peter Anderson

Employee Retention Credit For Restaurants

Restaurants that have between 5 and 500 employees are most likely eligible for the employee retention credit. There is one qualifier, though. To qualify, your restaurant had to either:

1. Shutdown at any time, fully or partially


2. lost 20% gross receipts in any quarter of 2020 or 2021

If you were affected by either of the above, you qualify for the ERC credit. To find out how much you qualify for and to start the process of receiving your funds, fill out the short form below. 

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Employers with 500 or fewer employees

If you are an employer with 500 or fewer full-time employees, you may be eligible for a retention credit for restaurants. This credit helps lower your federal payroll tax bill by helping to cover employee wages. You can claim up to $28,000 per qualified employee, even if you got the PPP loan.

To determine if your restaurant is eligible, you need to calculate the average number of full-time employees during the calendar year. In 2019, the reference period is the calendar quarter ending in January. The credit is available for up to 70% of the first $10,000 of qualified wages paid in each quarter.

Unlike other forms of tax credits, Employee Retention Credit is not based on hours worked. It is a refundable tax credit. As a result, it is an incentive to keep employees on staff, especially during periods of pandemic.

While the Employee Retention Tax Credit (ERTC) can be a valuable tool for your business, you must understand the rules. For example, you cannot claim the ERC while your employee is also taking paid leave.

If you have a large number of part-time employees, you are not considered a small employer. However, if you have 100 or fewer employees, you can use all their wages to reduce your tax bill.

A restaurant with 100 or fewer full-time employees can access Employee Retention Tax Credit in the first two quarters of 2021. They can also claim the remaining credit through the end of the year.

If you have a restaurant that is experiencing a significant decline in sales, you can also qualify for the ERTC. The credit is only available for payroll wages, however.

Your credit is not available if the gross receipts in the calendar quarter are more than 80 percent of the prior quarter's gross receipts. You may request advance payment of your credit on Form 7200 with the IRS.

There is some guidance for employers receiving the ERTC from the IRS in the form of Revenue Procedure 2021-33. Among other things, this procedure provides a safe harbor for calculating gross receipts.


Businesses with previously received PPP loans

Employee Retention Credit (ERC) is a tax credit designed to keep employees employed. However, only certain businesses qualify for the credit. It can help restaurants keep their staff and lower their payroll tax bills. This is an excellent tool for small business owners to use in order to help them get back on their feet.

Businesses that have previously received Paycheck Protection Plan (PPP) loans may be eligible for the ERC. This program is administered by the U.S. Government and is intended to assist small businesses affected by the COVID-19 pandemic. PPP was used by 76% of small businesses during the recession.

In order to be eligible for ERC, businesses must have fewer than 500 full-time employees. During the first two quarters of 2021, qualifying businesses can receive up to $5,000 per employee. For the remainder of the year, the maximum creditable wages is up to 70 percent of the first $10,000 of qualified wages for each full-time employee.

To claim the ERTC, the company must submit a worksheet along with additional documentation. It can include photocopies of employment tax forms and payroll ledgers. The IRS will then process the ERC and pay the company a check.

PPP loans were available to companies that had previously been laid off or were struggling with the COVID-19 pandemic. These loans were designed to help businesses hire back their employees during a shutdown. They were also helpful to businesses with self-employed employees. But there are now other options for small business owners.

While the PPP loan is no longer available, businesses that have received a PPP loan are still eligible for the Employee Retention Credit. To apply for the credit, companies must determine how much of their payroll costs are funded by PPP. Some of the expenses that can be attributed to the loan include the costs of health insurance and certain other non-wage expenditures.

Although the ERC was initially limited to organizations without PPP loans, the Consolidated Appropriations Act of 2021 expanded its eligibility. Businesses that received PPP loans in 2020 and 2021 are now eligible for the credit.

Restaurants subject to closure due to coronavirus

For a harried urbanite, an evening out at a top-notch restaurant is a welcome break. Unfortunately, a coronavirus outbreak has a way of bringing the lion's share of your wallet to the curb. While many establishments have taken the unfortunate opportunity to close their doors, a few have stayed in business for the long haul. One such restaurant is snooty upscale eatery Hakkasan, which has a well-earned cult following. A quick check of the company's website reveals that the chain operates 11 locations nationwide, including three in Manhattan and one in Queens. In all, the grand total of the eatery is in the millions of dollars, but that's a good thing for a small town like the boroughs of New York. With a staff of over two hundred, it is easy to see why a slew of employees may find themselves short changed.

Whether you are looking for a night on the town or a spot of etiquette, a meal at a top-notch place like Hakkasan is a worthwhile endeavor. But a trip to the boroughs may be the last time you check out the latest gastronomical offerings at your local burger joint.

IRS steps to expedite processing of claims

If you are considering claiming Employee Retention Credits (ERC) for your restaurant, you may want to take the following IRS steps to expedite processing of your claims. The restaurant industry is a significant beneficiary of the 45B tax credit.

There are a number of ways to calculate the ERC. For example, you can calculate the credit based on a combination of qualified wages, payroll taxes, and employer pretax contributions. It is important to remember that a portion of the credit is also refundable. This means that if you are eligible, you can receive a refund of up to $7,000. You can claim a refundable credit of up to 70% of the wages paid to employees who work for you during a non-service period.

However, the number of employees you can claim is limited. Currently, you can claim the credit for up to 500 full-time employees. But, you can increase the number of employees you can claim for ERC if you are a large employer. A large employer is an employer that has at least 100 full-time employees and paid at least $10,000 in qualified wages in a calendar quarter.

Although the IRS has a website with general guidance, you should consult an accountant or other professional for more specific information. They can provide you with guidance on filing Form 7200 and other issues you might encounter.

As you review your forms, you may be able to avoid mistakes and delays in processing. In particular, keep an eye out for errors that you made when calculating your wages. Typically, the IRS will process paper-filed Form 941s within three to four months. Alternatively, you can opt for an electronic filing. During this time, the IRS will delay payment associated with Form 7200.

However, if you need to make a change to your Form 941, you may need to amend your business income tax return. Some taxpayers are receiving letters from the IRS advising them of processing delays. If you need to make a change to your 2020 Form 941, you may be able to do so by filing a Form 7200 before January 21, 2021.