The Employee Retention Credit is a refundable tax credit that was created during the pandemic for employers who experienced difficulties in 2020 and 2021 as a result of COVID shutdown orders and related economic disruptions. Dominion wanted to get the word out to restaurant owners and to ensure they are taking advantage of this little-known tax credit because they may be eligible for up to $26,000 per employee. Even if businesses applied for and received PPP loans, they can still qualify for the ERC. In fact, unlike the PPP assistance that had a limited fund pool, any company that qualifies for the ERC is legally entitled to that money.
Typically our company recommends any restaurant that has more than five employees and experienced any kind of hardship during the pandemic be formally assessed by a qualified tax professional. From what Dominion has found to date, if a restaurant received PPP, they're likely to qualify for ERC. The potential upside of such a large credit makes it well worth looking into, and since this credit will be phasing out in April 2023, there is a limited window to file a claim. If you’re unsure of your eligibility, make sure you find out because you could have a winning lottery ticket in your pocket that you’re not cashing in.
One of the reasons that so many businesses are unaware of the credit is because it's a payroll tax credit, not an income tax credit. As a result, a lot of CPAs aren’t pursuing it because it's a one-time separate program and they haven’t familiarized themselves with it. It’s a perfect storm where the businesses’ payroll company thinks that the CPA will handle it, while the CPA thinks that the payroll company is going to handle it. In reality, nobody's handling it, and hundreds of thousands of dollars or more are being left on the table.
The total time that most restaurant owners who work with us need to dedicate to this process is less than three hours. For a tax credit that could be in the hundreds of thousands of dollars, there are not many other revenue-generating activities you can be doing that give that high of a return on time.