Employee Retention Tax Credit for Casinos: How to Qualify and Maximize Benefits

The COVID-19 pandemic has had a significant impact on the casino industry, with many casinos shutting down operations for extended periods. During this time, many employees were furloughed or laid off, leaving casinos struggling to retain their workforce. To help alleviate this issue, the IRS introduced the Employee Retention Tax Credit (ERTC), which provides a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the pandemic.

Casinos can benefit from the ERTC by claiming a refundable tax credit against the employer’s share of Social Security tax equal to 70% of the qualified wages they pay to employees. The credit is available for wages paid after December 31, 2020, through June 30, 2021, and is limited to $10,000 per employee per calendar quarter in 2021. To be eligible for the credit, casinos must have experienced a significant decline in gross receipts during certain eligibility periods in 2020 and 2021, or have been shut down due to a government order.

The ERTC is a complex tax credit, and casinos should ensure they meet all the eligibility requirements before claiming the credit. The IRS provides guidance for employers claiming the ERTC, including an eligibility checklist to help understand this complex credit. By taking advantage of the ERTC, casinos can retain their workforce and receive a tax credit that can help offset the financial impact of the pandemic.

Understanding the Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) is a refundable tax credit that was created under the CARES Act to help businesses and tax-exempt organizations that had employees and were affected by the COVID-19 pandemic. The credit is designed to encourage employers to keep their employees on the payroll, even if they are not currently working due to COVID-19-related circumstances.

Under the new rules, eligible employers can claim up to 70% of the first $10,000 of qualified wages paid to each employee from January 1, 2021, through September 30, 2021. The maximum limit is $7,000 per quarter per employee, for a maximum amount of $21,000 per employee per year. Some employers may also qualify for ERC for wages paid from October 1, 2021, through June 30, 2022, under the American Rescue Plan Act.

To be eligible for the ERTC, businesses must have experienced a significant decline in gross receipts or have been subject to a government order that fully or partially suspended their operations due to COVID-19. Eligible employers include small and midsize businesses, as well as tax-exempt organizations.

To claim the ERTC, eligible employers must report their total qualified wages and the related health plan expenses for each quarter on their employment tax returns, usually Form 941. Employers can also request an advance of the ERTC by submitting Form 7200 to the IRS.

It is important to note that employers cannot claim the ERTC for wages that are paid with forgiven Paycheck Protection Program (PPP) loan proceeds. Additionally, employers cannot claim the credit for the same wages that they use to claim the Work Opportunity Tax Credit (WOTC) or the Paid Family and Medical Leave Credit (PFML).

Overall, the ERTC is a valuable tool for eligible employers to help retain their employees during the COVID-19 pandemic. It is important for businesses to understand their eligibility and properly claim the credit to maximize its benefits.

Impact of COVID-19 on Employee Retention Tax Credit

The COVID-19 pandemic has significantly impacted the casino industry, leading to a decline in gross receipts for many casinos. As a result, many casinos have had to furlough or lay off employees. However, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act have provided some relief to casinos through the Employee Retention Tax Credit (ERTC).

The ERTC is a refundable tax credit that provides financial assistance to businesses and tax-exempt organizations that have been affected by the COVID-19 pandemic. Eligible employers can claim the ERTC for up to 50% of qualified wages paid to employees between March 12, 2020, and December 31, 2021. The maximum credit is $7,000 per employee per quarter, which can be applied against certain employment taxes.

To qualify for the ERTC, employers must have experienced a decline in gross receipts of at least 20% in a calendar quarter compared to the same quarter in the previous year. Alternatively, employers can qualify if they were partially or fully suspended due to a government order related to Covid-19.

Casinos have been particularly hard hit by the COVID-19 pandemic, with many having to close their doors temporarily or reduce capacity to comply with social distancing guidelines. As a result, many casinos have experienced a decline in gross receipts, making them eligible for the ERTC.

In summary, the ERTC has provided much-needed relief to casinos and other businesses affected by the Covid-19 pandemic. By providing financial assistance to employers who are struggling to retain employees, the ERTC is helping to mitigate the economic impact of the pandemic.

Interaction with the Paycheck Protection Program

The Employee Retention Tax Credit (ERTC) and Paycheck Protection Program (PPP) are two programs that can significantly benefit casinos. The Consolidated Appropriations Act (CAA) allows eligible employers to claim both the ERTC and PPP loans. However, there are some restrictions and limitations that employers must be aware of.

PPP loans are designed to help small businesses cover payroll costs, rent, utilities, and other expenses during the COVID-19 pandemic. If an employer receives a PPP loan, they are not eligible to claim the ERTC for wages paid with the PPP loan proceeds. However, the CAA allows employers who received a PPP loan to claim the ERTC for wages that were not paid with PPP loan proceeds.

Employers who received a PPP loan can still claim the ERTC for wages paid from January 1, 2021, to December 31, 2021, as long as they meet the eligibility requirements. The ERTC can be claimed for up to 70% of qualified wages, up to $10,000 per employee per quarter, for a maximum of $28,000 per employee in 2021.

It is important to note that if an employer receives forgiveness for their PPP loan, they cannot claim the ERTC for the same wages. The forgiven amount of the PPP loan is considered payroll costs and is not eligible for the ERTC.

Employers who received a PPP loan can still claim the ERTC for wages paid in 2020, even if they have already applied for forgiveness of their PPP loan.

In summary, while there are some restrictions and limitations, employers who received a PPP loan can still benefit from the ERTC for wages that were not paid with PPP loan proceeds. Employers should consult with their tax advisors to determine if they are eligible for the ERTC and how to maximize their benefits.

Claiming the Employee Retention Tax Credit

Casinos can claim the Employee Retention Tax Credit (ERTC) if they meet the eligibility criteria. The ERTC is a refundable tax credit that can be claimed by businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The requirements for claiming the ERTC are different depending on the time period for which the credit is claimed.

Advance Payment

Casinos can claim the ERTC for the tax period by reducing their federal employment tax deposits. If the amount of the ERTC exceeds the federal employment tax deposits, the casino can request an advance payment of the credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Qualified Wages

Qualified wages are wages paid to employees during the period of time for which the ERTC is claimed. For the period from March 13, 2020, to December 31, 2021, qualified wages include wages paid to employees regardless of whether they worked or not. For the period from January 1, 2022, to June 30, 2022, qualified wages include wages paid to employees who did not work due to a full or partial suspension of operations or a decline in gross receipts.

Form 941

Casinos must claim the ERTC on their quarterly employment tax return, Form 941, Employer’s Quarterly Federal Tax Return. The ERTC is claimed on line 11c of Form 941 for the applicable quarter.

Form 7200

If the amount of the ERTC exceeds the federal employment tax deposits for the quarter, the casino can request an advance payment of the credit by filing Form 7200.

Form 941-X

If a casino has already filed Form 941 for a quarter and later determines that it is eligible for the ERTC, it can claim the credit by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for the applicable quarter.

Adjusted Return

If a casino has already filed Form 941 for a quarter and claimed the ERTC, but later determines that it claimed too much or too little of the credit, it can correct the amount claimed by filing an adjusted return, Form 941-X.

ERC Claim

Casinos can claim the ERTC for the first two quarters of 2021 on their Form 941 for the third quarter of 2021. The ERTC for the third and fourth quarters of 2021 can be claimed on Form 941 for the fourth quarter of 2021.

Withdraw

If a casino has claimed the ERTC but later determines that it is not eligible for the credit, it can withdraw the claim by filing Form 941-X.

Tax Period

For the tax period from March 13, 2020, to December 31, 2021, the maximum amount of the ERTC is $5,000 per employee. For the tax period from January 1, 2022, to June 30, 2022, the maximum amount of the credit is $7,000 per employee.

Void

The ERTC is void for any wages paid with the proceeds of a Paycheck Protection Program (PPP) loan that has been forgiven.

Updates and Amendments in Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) has undergone several updates and amendments since its inception. The American Rescue Plan Act of 2021 (ARPA) extended and modified the ERTC, making it more accessible to businesses and tax-exempt organizations affected by the COVID-19 pandemic.

Under ARPA, the ERTC is available to eligible employers who retained employees during the COVID-19 pandemic and experienced a significant decline in gross receipts. The credit is equal to 70% of qualified wages paid to employees, up to $10,000 per employee per quarter. The credit is refundable, meaning that eligible employers can receive the credit even if they have no tax liability.

Notice 2021-23 provides guidance on the changes to the ERTC made by ARPA. The notice clarifies the eligibility requirements for the ERTC and provides instructions for claiming the credit on employment tax returns.

The ERTC was originally set to expire on December 31, 2020, but the Consolidated Appropriations Act, 2021 extended the credit through June 30, 2021. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 further extended the credit through December 31, 2021.

Revenue Procedure 2021-33 provides guidance on how employers can claim the ERTC for the third and fourth quarters of 2021. The revenue procedure also provides guidance on how to claim the credit for wages paid to employees on leave due to COVID-19.

Non-profit organizations are eligible for the ERTC, but they may have different eligibility requirements than for-profit businesses. The Treasury Department has provided guidance on how non-profit organizations can claim the ERTC.

The ERTC can also be used in conjunction with other COVID-19 relief programs, such as the Restaurant Revitalization Grant and the Shuttered Venue Operators Grant.

Overall, the ERTC has undergone several updates and amendments since its inception, making it more accessible to eligible employers affected by the COVID-19 pandemic. Employers should consult with their tax advisors to determine their eligibility for the credit and how to claim it on their employment tax returns.

Frequently Asked Questions

What is the maximum amount of the Employee Retention Credit?

The maximum amount of the Employee Retention Credit (ERC) is 70% of qualified wages paid to employees, up to a maximum of $10,000 per employee per quarter. This means that the maximum credit amount per employee is $7,000 per quarter.

What are the requirements to qualify for the Employee Retention Credit?

To qualify for the ERC, a business must meet one of two requirements:

  1. The business was fully or partially suspended due to a government order related to COVID-19 during the calendar quarter, or
  2. The business experienced a significant decline in gross receipts during the calendar quarter.

How do I record the Employee Retention Credit on my tax return?

Businesses can claim the ERC on their employment tax returns, such as Form 941, and Employer’s Quarterly Federal Tax Return. The credit is treated as a refundable tax credit, which means that businesses can receive the credit even if they have no tax liability.

What is the disallowance for the Employee Retention Credit deduction?

Businesses cannot claim a deduction for wages paid with the ERC. This means that the ERC is treated as a tax credit rather than a tax deduction.

What are the subsequent quarter requirements for the Employee Retention Credit?

To qualify for the ERC in the subsequent quarter, a business must continue to meet the eligibility requirements. Additionally, the business must not have received a Shuttered Venue Operator Grant or a Restaurant Revitalization Fund Grant.

Which employees do not qualify for the Employee Retention Credit?

The following employees do not qualify for the ERC:

  • Employees who own more than 50% of the business or are related to someone who does
  • Employees who are related to the business owner or a more than 50% owner
  • Employees who were not paid wages during the calendar quarter

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