PRLA Restaurant & Lodging Matters Spring 2021

10 • PENNSYLVANIA RESTAURANT & LODGING matters • Spring 2021 ELIGIBLE CIRCUMSTANCES. Since lawmakers intended this as pandemic relief, you can only get the ERTC if 1) your operation was partially or fully suspended by governmental authority due to COVID-19 (including capacity restrictions due to social distancing, full or partial closure of indoor dining, or closure of all on-site dining); or 2) your business experienced a significant decline in sales when comparing a calendar quarter (or prior quarter) to its matching quarter in 2019. ELIGIBLE WAGES. Qualified wages are defined by IRS Code in section 3121(a) and section 3231(e). You can include group health plan expenses, such as monthly insurance premiums, which will come as a relief to many restaurants who continue to support their staff. INELIGIBLE WAGES. Wages are qualified for an ERTC only if the wages are made to an employee who continues to be employed in the calendar quarter for which the credit is being claimed. Any payments correlated with a former employee’s termination of employment are not qualified wages because they are payments for the past employment relationship and not attributable for employee retention credits. ADVANCE PAYMENTS. For 2020, the IRS allowed employers to reduce deposits of employment taxes when anticipating ERTC for qualified wages by filing IRS Form 7200. For 2021, advance payments of the ERTC are permitted only for small employers (500 or fewer employees during 2019) and only up to 70 percent of the average quarterly wages employers paid in calendar year 2019. TAX TREATMENT. If you receive an ERTC for qualified wages you paid in 2020 or 2021, you can’t also deduct those wages as a business expense from your federal taxable income. Always consult your accountant or tax advisor on these and other matters. For more information on the ERTC, click on the following links: Î National Restaurant Association Understanding the ERTC Fact Sheet Î “IRS provides guidance for employers claiming the Employee Retention Credit for first two quarters of 2021, ” IRS, April 2, 2021 Î “Notice 2021-23 and Employee Retention Credit for First Two Calendar Quarters of 2021,” KPMG, April 6, 2021 Î “IRS provides guidance for employers claiming the Employee Retention Credit for 2020, including eligibility rules for PPP borrowers, ” IRS, March 1, 2021 Î “2020 Guidance for Employee Retention Tax Credit, Notice 2021-20, ” IRS, March 1, 2021 Î “Notice 2021-20 provides much anticipated guidance regarding the employee retention credit” for KPMG, March 5, 2021 First published on restaurant.org , May 5, 2021