Employee Retention Tax Credit for Amusement Parks: How to Maximize Your Savings

Amusement parks, like many other businesses, have been impacted by the COVID-19 pandemic. To help alleviate some of the financial burden, the government has implemented various relief programs, including the Employee Retention Tax Credit (ERTC). This tax credit is designed to encourage businesses to keep employees on their payroll, even during difficult times.

The ERTC is a refundable tax credit that allows eligible employers to receive a credit against their payroll taxes. The credit is equal to a percentage of qualified wages paid to employees during a specific period of time. For eligible employers, the credit can be as much as $10,000 per employee for the 2021 tax year. This credit can be claimed on employment tax returns, such as Form 941, or can be advanced through Form 7200.

Amusement parks may be eligible for the ERTC if they meet certain requirements. For example, the park must have experienced a decline in gross receipts or been subject to a governmental authority order due to COVID-19. Additionally, the park must have had an average of 500 or fewer full-time employees in 2019. By taking advantage of the ERTC, amusement parks can reduce their payroll costs and receive a refundable tax credit that can help keep their business afloat during these challenging times.

Understanding the Employee Retention Credit

The Employee Retention Credit (ERC) is a refundable tax credit for eligible employers who retained their employees during the COVID-19 pandemic. The credit was introduced to encourage businesses to keep their employees on the payroll despite the economic downturn caused by the pandemic.

Basics of the ERC

The ERC is a tax credit that is available to eligible employers who retained their employees during the pandemic. The credit is equal to 70% of qualified wages paid to employees from January 1, 2021, through December 31, 2021. The maximum credit amount per employee is $28,000.

The credit is claimed on the employer’s quarterly employment tax return, Form 941. If the credit exceeds the amount of employment taxes owed, the employer can request a refund of the excess credit.

Eligibility Criteria

To be eligible for the ERC, an employer must meet certain criteria. The eligibility criteria are different for the 2020 and 2021 tax years.

Eligibility for 2020

For the 2020 tax year, an eligible employer is one that:

  • Had operations fully or partially suspended due to a COVID-19-related government order, or
  • Experienced a significant decline in gross receipts during any quarter in 2020.

An employer is considered to have experienced a significant decline in gross receipts if its gross receipts for a calendar quarter in 2020 are less than 50% of its gross receipts for the same calendar quarter in 2019.

Eligibility for 2021

For the 2021 tax year, an eligible employer is one that:

  • Had operations fully or partially suspended due to a COVID-19-related government order, or
  • Experienced a significant decline in gross receipts during any quarter in 2021.

An employer is considered to have experienced a significant decline in gross receipts if its gross receipts for a calendar quarter in 2021 are less than 80% of its gross receipts for the same calendar quarter in 2019.

Eligible Employers

Eligible employers include:

  • Businesses with 500 or fewer employees
  • Tax-exempt organizations
  • State and local governments and their instrumentalities

Employers who received a Paycheck Protection Program (PPP) loan are also eligible for the ERC. However, the same wages cannot be used for both PPP loan forgiveness and the ERC.

In conclusion, the ERC is a tax credit that was introduced to encourage eligible employers to retain their employees during the COVID-19 pandemic. Eligible employers can claim the credit on their quarterly employment tax return and receive a refund of any excess credit. To be eligible, an employer must meet certain criteria, including having operations fully or partially suspended due to a COVID-19-related government order or experiencing a significant decline in gross receipts.

Application and Calculation of the ERC

Calculating the Credit

To calculate the Employee Retention Tax Credit (ERC), eligible employers can claim a refundable tax credit against certain employment taxes equal to 50% of the qualified wages paid to employees between March 12, 2020, and January 1, 2021. For 2021, eligible employers can claim a refundable tax credit against certain employment taxes equal to 70% of the qualified wages paid to employees between January 1, 2021, and December 31, 2021.

The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, which means the maximum credit for 2020 is $5,000 per employee, and the maximum credit for 2021 is $7,000 per employee per quarter, or $28,000 per employee for the entire year.

Filing Process

To claim the ERC, eligible employers can use Form 941, Employer’s Quarterly Federal Tax Return, to claim the credit against their payroll tax liability. Alternatively, eligible employers can reduce their federal employment tax deposits by the amount of the anticipated credit and then claim the credit on Form 941.

If the amount of the anticipated credit exceeds the employer’s federal employment tax deposits, the employer can file Form 7200, Advance Payment of Employer Credits Due to COVID-19, to request an advance payment of the credit from the IRS.

If an eligible employer has already filed Form 941 and did not claim the ERC, the employer can file Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to claim the credit for the applicable calendar quarter(s).

Overall, the ERC is a refundable tax credit that can help eligible employers keep their employees on payroll during the COVID-19 pandemic. By understanding the calculation and filing process, eligible employers can take advantage of the credit and receive the maximum benefit of $10,000 per employee for qualified wages paid.

Paycheck Protection Program and ERC

The Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) are two different programs that can help amusement parks during the COVID-19 pandemic. PPP is a loan program that provides small businesses, including amusement parks, with funds to pay their employees and cover other expenses. The ERC, on the other hand, is a refundable tax credit that can be claimed by eligible employers who retain their employees during certain periods of time.

Interaction between PPP and ERC

Amusement parks that receive PPP loans can still claim the ERC, but the same wages cannot be used to claim both programs. The ERC is calculated based on qualified wages paid to employees, and the amount of the credit is up to 70% of those wages, up to $10,000 per employee per quarter. If an amusement park uses PPP funds to pay employee wages, those wages cannot be used to calculate the ERC. However, wages that are not paid with PPP funds can still be used to claim the ERC.

Claiming ERC after PPP Forgiveness

If an amusement park receives forgiveness for its PPP loan, it can still claim the ERC for qualified wages paid after the PPP loan forgiveness date. However, the wages used to calculate the ERC cannot be the same wages used to obtain PPP loan forgiveness. In other words, if an amusement park uses PPP funds to pay employee wages, it cannot use those same wages to calculate the ERC.

It is important to note that the ERC and PPP have different eligibility requirements and different periods of time for which they can be claimed. Amusement parks should consult with their tax advisors to determine the best course of action for their specific situation.

Legal and Legislative Updates

Recent Changes

The Employee Retention Tax Credit (ERTC) has undergone several changes due to recent legislation. The CARES Act, as originally enacted, provided for an ERTC for eligible employers who pay qualified wages to some or all employees after March 12, 2020, and before January 1, 2021. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) also allowed employers to defer the deposit and payment of the employer’s share of Social Security taxes and self-employed individuals to defer payment of certain self-employment taxes.

The American Rescue Plan Act of 2021 (ARPA) extended the ERTC through December 31, 2021. The ARPA also expanded the eligibility requirements for the ERTC and increased the amount of the credit. The ARPA allows employers to claim the ERTC for qualified wages paid after June 30, 2021, and before January 1, 2022. The ARPA also allows employers to claim the ERTC for certain recovery startup businesses.

Future Projections

Congress is currently considering legislation that would extend the ERTC through December 31, 2022. The Employee Retention Tax Credit Reinstatement Act (S. 3625) was introduced in the Senate in 2022. If passed, this legislation would extend the ERTC through December 31, 2022, and increase the amount of the credit.

Employers should stay up-to-date on any changes to the ERTC and other tax credits by consulting with their tax advisors and monitoring legislative updates.

Implications for Amusement Parks

The Employee Retention Credit (ERC) is a refundable tax credit that can be claimed by businesses, including amusement parks, that meet certain eligibility requirements. The credit is designed to encourage businesses to retain their employees during the COVID-19 pandemic.

Amusement parks, like many other businesses, have been significantly impacted by the pandemic. According to a study by IAAPA, the amusement and theme park industry suffered a 70% drop in wages due to the pandemic. As a result, many amusement parks have had to furlough or lay off employees.

The ERC can help alleviate some of the financial burden on amusement parks by providing a tax credit for retaining employees. The credit is equal to 50% of qualified wages paid to employees, up to a maximum of $10,000 per employee.

To be eligible for the ERC, amusement parks must meet certain requirements. They must have experienced a significant decline in gross receipts or have been fully or partially suspended due to government orders related to COVID-19. Additionally, they must not have received a Paycheck Protection Program (PPP) loan or must have used the loan for expenses that do not qualify for forgiveness.

Amusement parks that meet these requirements can claim the ERC on their employment tax returns. The credit can be used to offset the employer’s portion of Social Security taxes. Any excess credit can be refunded to the employer.

Overall, the ERC can provide much-needed relief to amusement parks that have been struggling during the pandemic. By providing a tax credit for retaining employees, the credit can help ensure that amusement parks have the staff they need to operate and provide entertainment to the public.

Frequently Asked Questions

Who qualifies for the Employee Retention tax credit?

Amusement parks that have experienced a significant decline in revenue due to the COVID-19 pandemic may qualify for the Employee Retention tax credit. To be eligible, the park must have experienced a decline of at least 20% in gross receipts during a calendar quarter in 2020 or 2021 compared to the same quarter in 2019.

What is the Employee Retention credit deadline for 2023?

The deadline for claiming the Employee Retention tax credit for the 2023 tax year is April 15, 2024. However, it is recommended to apply for the credit as soon as possible to avoid any delays.

What is the IRS Employee Retention Credit FAQ?

The IRS has provided a list of frequently asked questions (FAQs) regarding the Employee Retention tax credit. The FAQs cover topics such as eligibility, withdrawing a claim, recordkeeping, and scams. If you need help or advice about claiming the credit, correcting your tax return, or withdrawing your claim, the IRS recommends seeking out a reputable tax professional.

How does the Employee Retention tax credit work?

The Employee Retention tax credit allows eligible employers to claim a credit against certain employment taxes for qualified wages paid to employees. The credit is equal to 50% of qualified wages paid, up to a maximum of $10,000 per employee for all quarters.

How to apply for Employee Retention Credit?

To apply for the Employee Retention tax credit, eligible employers must report their total qualified wages and the related credits for each calendar quarter on their federal employment tax returns. If the credit exceeds the employer’s total liability for social security taxes for the quarter, the excess credit is refundable.

What can I spend ERC money on?

The Employee Retention tax credit can be used to cover the cost of employee wages, health benefits, and employer-paid taxes. The credit cannot be used to cover the cost of employee benefits, such as retirement plans or paid time off.

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