Employee Retention Tax Credit for Breweries: Everything You Need to Know

The Employee Retention Credit (ERC) is a tax credit that offers financial assistance to eligible employers who retained their employees during the COVID-19 pandemic. Many businesses, including breweries, have been impacted by the pandemic and have turned to the ERC for support. The ERC is a refundable tax credit equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2022.

Breweries, in particular, have been hit hard by the pandemic. The ERC can provide significant financial relief to breweries who have struggled to stay afloat during these challenging times. The ERC is available to employers who have experienced either a full or partial suspension of their business operations due to a government order related to COVID-19 or who have experienced a significant decline in gross receipts.

The ERC can be claimed by eligible employers on their quarterly employment tax returns, such as Form 941. Eligible employers can also request an advance payment of the credit by submitting Form 7200. The ERC has undergone several changes since its introduction of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. It is important for breweries to stay up-to-date with the latest guidance from the Internal Revenue Service (IRS) to ensure they are taking advantage of all available benefits.

Understanding Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC), also known as the Employee Retention Credit (ERC), is a refundable tax credit designed to encourage businesses and tax-exempt organizations to keep their employees on payroll. The credit is available to eligible employers who experienced significant revenue loss or were fully or partially suspended due to the COVID-19 pandemic.

To be eligible for the ERTC, the employer must have experienced a significant decline in gross receipts or been fully or partially suspended due to a government order. The credit is calculated based on the wages paid to eligible employees during the eligible period. The eligibility period for the ERTC is from March 13, 2020, to December 31, 2021.

The ERTC is a broad-based refundable tax credit that is worth up to 50% of the qualified wages paid to each employee, up to a maximum of $10,000 per employee per quarter. The credit is available to eligible employers for wages paid from March 13, 2020, to December 31, 2021.

For breweries and other small businesses, the ERTC can be a valuable source of financial relief. To qualify for the credit, the brewery must have experienced a significant decline in gross receipts or been fully or partially suspended due to a government order. The credit is calculated based on the wages paid to eligible employees during the eligible period.

The ERTC is a complex tax credit, and breweries and other small businesses should consult with a tax professional to determine their eligibility and calculate the credit. The IRS has provided guidance on the ERTC, including frequently asked questions, eligibility checklists, and other resources to help businesses understand the credit.

Overall, the ERTC can be a valuable source of financial relief for breweries and other small businesses that have been impacted by the COVID-19 pandemic. By keeping employees on payroll, businesses can not only benefit from the credit but also maintain their workforce and support the local economy.

Eligibility for Breweries

To be eligible for the Employee Retention Credit (ERC), breweries must meet certain requirements. The ERC is a refundable and advanceable tax credit that rewards businesses that maintained employees during the ongoing COVID-19 pandemic.

Impact of COVID-19 pandemic

The COVID-19 pandemic has affected businesses across the globe, and breweries are no exception. Many breweries have had to close their doors or reduce their operations due to government orders and restrictions. As a result, many breweries have had to lay off employees or reduce their hours.

Government Orders and Restrictions

To be eligible for the ERC, breweries must have experienced either a full or partial suspension of operations due to a government order related to COVID-19. This includes orders that limit commerce, travel, or group meetings.

Breweries must also have experienced a significant decline in gross receipts during the calendar quarter when the government order was in effect. A significant decline is defined as a 50% or greater decline in gross receipts compared to the same quarter in the previous year.

Additionally, breweries must have maintained their employees during the period of the government order or restriction. This means that breweries must not have laid off employees or reduced their hours during this time.

In summary, breweries that have experienced a full or partial suspension of operations due to a government order related to COVID-19 and have maintained their employees during this time may be eligible for the ERC.

Claiming the Tax Credit

Breweries and other small businesses that maintained employees during the COVID-19 pandemic may be eligible for the Employee Retention Tax Credit (ERTC). To claim the tax credit, businesses need to meet certain requirements and follow specific procedures.

Payroll and Wages

To claim the ERTC, businesses must have paid qualified wages to their employees during the eligible period. Qualified wages are wages paid between March 13, 2020, and December 31, 2021. The amount of the tax credit is equal to 50% of the qualified wages paid to each employee, up to a maximum of $5,000 per employee.

Businesses can claim the tax credit on their Form 941, Employer’s Quarterly Federal Tax Return, for the quarter in which the qualified wages were paid. If the tax credit exceeds the amount of federal taxes owed, businesses can request a refund or apply the excess credit to future payroll tax deposits.

Dealing with PPP Loans

Businesses that received a Paycheck Protection Program (PPP) loan can still claim the ERTC, but there are some restrictions. The same wages cannot be used to calculate both the PPP loan forgiveness and the ERTC. Businesses can only claim the tax credit for qualified wages that were not paid with PPP loan funds.

If a business claimed the ERTC for wages that were later forgiven under the PPP, they must amend their Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for the quarter in which the wages were paid. The amended return must be filed by the deadline for filing the income tax return for the year in which the wages were paid.

Overall, businesses can claim the ERTC to help offset payroll costs and federal taxes. By following the procedures and requirements set forth by the IRS, breweries and other small businesses can take advantage of this valuable tax credit.

Financial Implications and Benefits

The Employee Retention Tax Credit (ERTC) can have a significant impact on the cash flow of breweries and other small businesses that have experienced a decline in gross receipts due to the ongoing COVID-19 pandemic. The credit is a refundable tax credit that rewards businesses that maintained employees during the pandemic.

Impact on Cash Flow

The ERTC can provide businesses with a significant amount of cash relief. Under the Consolidated Appropriations Act (CAA), businesses can claim a credit of up to 70% of qualified wages paid between January 1, 2021, and December 31, 2021, up to a maximum of $28,000 per employee. The credit can be retroactively claimed for tax year 2020 as well.

For businesses with a significant decline in gross receipts, credit can be a lifeline. Businesses with gross receipts that are less than 80% of the same calendar quarter in 2019 are eligible for the credit. The credit can also be claimed if the business was fully or partially suspended due to a government order related to COVID-19.

Recovering from Revenue Loss

The ERTC can help businesses recover from revenue loss by providing them with additional cash flow. The credit can be used to offset payroll taxes, including federal income tax withheld, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes.

For recovery startup businesses, the ERTC can be particularly helpful. Recovery startup businesses are businesses that started operating after February 15, 2020 and have average annual gross receipts of $1 million or less. These businesses can claim a credit of up to $50,000 per quarter for the first two quarters of 2021, even if they did not experience a significant decline in gross receipts.

In summary, the ERTC can provide breweries and other small businesses with a significant amount of cash relief, helping them to recover from revenue loss and maintain their capacity to operate. Businesses should consult with their tax advisors to determine their eligibility for the credit and to ensure that they are claiming the credit correctly.

Seeking Professional Advice

Navigating tax laws and credits can be a complex and confusing process. It is highly recommended that breweries seeking to take advantage of the Employee Retention Tax Credit (ERTC) seek the advice of a tax professional or advisor. They can provide valuable guidance on how to properly claim the credit and ensure compliance with the CARES Act and other relevant legislation.

A tax professional can also provide insight into other tax credits and incentives that may be available to breweries, such as the Work Opportunity Tax Credit (WOTC). They can help determine which credits are most beneficial to the brewery’s specific situation and provide assistance with the application process.

It is important to note that there are statutes of limitations for claiming tax credits, so breweries should act promptly to ensure they do not miss out on potential benefits. Additionally, breweries should be aware of potential scams related to tax credits and only work with reputable tax professionals and advisors.

In summary, seeking professional advice from a tax professional or advisor can help breweries navigate the complex world of tax credits and ensure compliance with relevant legislation. They can provide valuable guidance on claiming the ERTC and other available tax credits and incentives and help breweries avoid potential scams.

Frequently Asked Questions

What is the maximum amount of employee retention tax credit that a brewery can receive?

The maximum amount of employee retention tax credit that a brewery can receive is $7,000 per employee per quarter for 2023, which is an increase from the $5,000 per employee per quarter for 2020. The maximum credit that a brewery can claim for 2023 is $28,000 per employee.

What are the eligibility requirements for breweries to claim the employee retention tax credit?

To be eligible for the employee retention tax credit, breweries must meet several requirements. First, the brewery must have experienced a decline in gross receipts of at least 20% in any quarter of 2020 or 2023 compared to the same quarter in 2019. Second, the brewery must have had operations fully or partially suspended due to a government order related to COVID-19 or have experienced a significant decline in gross receipts. Third, the brewery must have had an average of 500 or fewer full-time employees in 2019.

What is the duration of the employee retention tax credit for breweries?

The employee retention tax credit for breweries is available for wages paid from March 13, 2020, through December 31, 2023. However, the credit is only available for wages paid during the periods in which the brewery meets the eligibility requirements.

What are the differences between the employee retention tax credit for breweries in 2020 and 2023?

The employee retention tax credit for breweries in 2023 has a higher maximum credit amount per employee per quarter and a longer duration than the credit available in 2020. Additionally, the eligibility requirements for 2023 include a decline in gross receipts of at least 20%, while the eligibility requirements for 2020 required a complete or partial suspension of operations due to a government order related to COVID-19.

What are some common disqualifications for breweries to claim the employee retention tax credit?

Breweries may be disqualified from claiming the employee retention tax credit if they do not meet the eligibility requirements, such as not experiencing a decline in gross receipts or having more than 500 full-time employees in 2019. Additionally, breweries may be disqualified if they claim the credit for wages paid to family members or if they claim the credit for wages paid with forgiven Paycheck Protection Program (PPP) loans.

What are some alternative tax credits that breweries can claim if they don’t qualify for the employee retention tax credit?

Breweries that do not qualify for the employee retention tax credit may be eligible for other tax credits, such as the Work Opportunity Tax Credit or the Research and Development Tax Credit. It is recommended that breweries consult with a tax professional to determine which tax credits they may be eligible for.

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