Employee Retention Credit For Restaurants


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For restaurants with budgets tight and tax season crisis, many restaurateurs overthink about how to claim the Employee Retention Tax Credit to maintain smooth activities.

In March 2020, the US federal government passed the “Coronavirus Aid, Economic, Relief, and Security Act,” also known as the CARES Act. Under this program Act, all the Employee Retention Credit created aim to help affected businesses, like restaurants, maintain smooth activities and keep their employees on the payroll.

In recent news, many restaurants now have a little lifeline that could help them run their business smoothly and ride out the remainder of the pandemic. Generally, only some restaurants are eligible for funding. Still, the program presents a major opportunity for business owners to significantly lower their payroll tax bill and help them free up enough funds to stay in business. 

To better understand this valuable restaurant tax credit program, here is a simple guide to the Employee Retention Tax Credit program covers every single thing you need to know, including:

Tax Credits

Restaurant owners withhold a certain amount of their employee’s salaries each pay period to pay the federal unemployment tax. However, Payroll tax credits allow business owners to keep some of this money by reducing the amount of social security and federal taxes owed.

For example, let’s assume the quarterly payroll tax bill is $13,000. If any business owner is eligible for a $5,000 tax credit, his total tax payment for that quarter would be reduced to $9,000.

Restaurant Retention Tax Credits

This is a refundable payroll tax credit for any qualified wages that are paid and qualified healthcare costs provided by an employer that is financially impacted by the COVID-19 pandemic. In 2020, the Employee Retention Tax Credit only offered eligible employers a refundable tax credit of 50%. In the following year, it was increased by the government to 70%.

So now, if the pandemic has financially impacted your restaurant, the Tax Credit program is a coronavirus tax credit designed to help reduce your payroll tax bill, which will help you maintain a good business atmosphere and keep your staff employed during the pandemic.

Eligible parties for the restaurant retention Credit

Restaurant Retention Tax Credit is organized to help businesses and business owners that the COVID-19 pandemic has financially impacted. To be eligible for the Employee retention credit for restaurants, the business owner must satisfy at least one or two categories:

  1. Business owners must have experienced a 50% or more in gross receipts relative to the same quarter the year prior. 
  2. Business owners must also demonstrate a decline in gross receipts by 20% or more in the quarter.

What Is the ERC Restaurant Retention Tax Credit Amount?

A business owner needs to note that the Erc for restaurants is provided for the 2020 pandemic, extending for at least through the first two quarters of the following year. Generally, eligible restaurants could receive a sum of up to $6,000 per employee and up to $15,000 per employee in the next year.

Although, the amount of funds your business is eligible for strictly depends on how your business allocated expenses and payroll and whatever they filed for when you filed for forgiveness. Business owners cannot use their forgiven PPP funds in an account and calculate the Employee Retention Tax Credit.

With all the above mentioned in mind, let’s review the Employee Retention Credit amounts for 2020 and 2021.

How Restaurant Owners Can Claim The Tax Credit.

To claim your Erc Credits for the restaurant, you must file a detailed Form properly. However, this form will allow you to claim refunds for payroll.

In 2021, restaurant owners could reduce their employment tax deposits and then use them to claim an advanced refund of the estimated funds remaining credits for the first and second quarters of the year after the pandemic. Restaurant owners should speak to their accountants about this approach as it can come with a big learning curve.


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