The ERC for the restaurant industry
Businesses in many industries may qualify for a substantial payroll tax refund through the Employee Retention Credit (ERC), even if they received PPP loans.Determine Eligibility
The impact of the pandemic on the restaurant industry
Which industries do you think were affected by COVID-19 the most? There’s an argument to be made for many, but the restaurant sector is likely at the top of your list.
While recovery is underway, the pandemic disproportionately affected restaurants of all sizes. Consider this:
of operators say they did not open to full capacity for indoor on-premises dining
employers report staffing shortages
of operators say food costs are higher than they were prior to COVID-19
Bars, cafés, and dining establishments were hit hard by governmental orders, which limited the number of in-person customers they could serve and minimized the human contact needed to serve them.
Luckily, eligible restaurant owners can apply for relief through a program called the Employee Retention Credit (ERC).
What is the ERC?
So, what is the ERC? It’s a payroll tax refund that helps eligible businesses get thousands back per employee they kept on payroll during the pandemic. Meaning, the more W2 employees you kept on payroll at your restaurant, the more you’ll likely receive in return.
This government program was developed to encourage and support employers who retained existing employees throughout 2020 and the first three quarters of 2021 by offering a generous payroll tax refund through the IRS.
How was your restaurant affected*?
2020 was a year of quick and constant change, with businesses pivoting on the fly to new methods, new menus, and new ways of operating. Many food service businesses had to adopt completely new business models altogether.
Among other challenges, here are some of the hardships and hurdles that restaurants, bars, food trucks, and all types of food service businesses faced:
Full or partial shutdown of indoor dining
Mandated change to hours of operation
Interruption of business due to supply chain issues
Inability to work with vendors
Increased cleaning measures
Changes in mandates causing closing and re-opening
If you experienced any of these, you may be a prime candidate for the ERC.
Success stories from businesses in the church and non-profit industries
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We work for you, with no upfront fee
Our independent tax attorneys have extensive knowledge of ERC qualifications and IRS tax code to help eligible churches and other non-profits claim their refund.
How can restaurants use the ERC funding?
For businesses that qualify for the ERC, there are many ways to put the payroll tax refund to good use – things like paying debts, operating expenses, hiring and retaining employees, and growing your business.
Many companies that claim the ERC decide to re-invest in their businesses, which might mean:
Allocating to labor costs
Financial relief due to significant revenue decline
Boosting cash revenues
ERC qualifications for the restaurant industry
What does it take for a restaurant like yours to qualify for the ERC?
First, you’ll want to take note of the adjustments your business made to survive the pandemic:
1. Did you experience a full or partial shutdown?
2. How did you handle on-premise dining?
3. Did you pivot to delivery?
When you partner with a company like Innovation Refunds, you’ll be advised on whether you qualify for the refund under a concept called “limited commerce,” which refers to a partial suspension due to government orders. Using your written testimony about how COVID affected your business, our independent tax attorneys will determine if your business can file under limited commerce.
Next, you'll want to consider how many employees you kept on payroll during 2020 and 2021. Were they full-time or part-time? Remember that cash and credit tips are reportable for payroll tax and can qualify for ERC wages, as long as the business meets the other requirements. Ultimately, restaurants in almost every state may potentially qualify for the ERC due to government shutdown orders. Even if your revenue did not decline, your restaurant may have experienced partially suspended operations due to a government mandate, and it may still qualify under limited commerce.
We’ve helped thousands of eligible businesses, including those in the restaurant industry, claim the ERC:
Qualifying them for government shutdown orders
Determining eligibility under limited commerce
Outlining COVID’s impact beyond reduced revenue
It’s easy to get started and see if you are eligible for the ERC*
If you’re in the restaurant industry and haven’t heard of the ERC, you’re not alone. In fact, around 90% of bars and restaurants have yet to claim their ERC, and 64% hadn’t even heard of it.
Why is this? Originally, the ERC was not accessible for businesses that took part in PPP funding. This means that many employers took out PPP loans in 2020 but skipped the ERC.
However, thanks to the Consolidated Appropriations Act (CAA) of 2021, the program has undergone expansion and under new rules, you can claim the ERC and PPP.
Frequently Asked Questions
It’s easy to get started and see if you qualify for ERC assistance. Our independent tax attorneys will help determine your business’ eligibility, check for missing documentation, calculate your refund, and submit your claim if you qualify.
*Innovation Refunds works with a team of independent tax professionals. We will share your information with these professionals to evaluate and process your claims. Innovation Refunds does not provide tax or legal advice. Terms & conditions apply.