Employee Retention Tax Credit for Gyms and Fitness Centers: What You Need to Know

Gyms and fitness centers have been hit hard by the COVID-19 pandemic, with many businesses struggling to stay afloat. To help alleviate some of the financial burden, the government has introduced the Employee Retention Credit (ERC), which provides a refundable tax credit to eligible businesses that have been impacted by the pandemic. This credit is designed to help businesses retain employees and avoid layoffs.

The ERC is available to gyms and fitness businesses that have experienced a significant decline in revenue due to the pandemic. Eligible businesses can claim a tax credit of up to $7,000 per employee per quarter, which can be used to offset payroll taxes. To qualify for the credit, businesses must meet certain eligibility criteria, including experiencing a decline in revenue or being subject to government restrictions that have affected their operations.

The ERC is a valuable resource for gyms and fitness centers that are struggling to keep their doors open during these challenging times. By providing financial support to businesses that have been impacted by the pandemic, the ERC is helping to ensure that the fitness industry can continue to thrive and provide valuable services to the community.

ERTC for GYMS

Understanding the Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) is a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. It is designed to help businesses retain their employees by providing a tax credit for a portion of the wages paid to employees. The credit is available for eligible employers who retained employees during the pandemic, even if the business was closed or had reduced operations.

To be eligible for the ERTC, a business must meet certain requirements. The credit is available to businesses that experienced a significant decline in gross receipts, either in 2020 or 2021, compared to the same quarter in 2019. The decline must be at least 20% in 2021 and 50% in 2020. Alternatively, the credit is available to businesses that were fully or partially suspended due to a government order related to COVID-19.

The credit amount is equal to 70% of the qualified wages paid to employees, up to a maximum of $10,000 per employee per quarter. The credit is available for wages paid between March 13, 2020, and December 31, 2021. The credit is claimed on the employer’s quarterly federal tax return, Form 941.

The ERTC is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law in March 2020. The credit was extended and expanded by subsequent legislation, including the Consolidated Appropriations Act, of 2021, and the American Rescue Plan Act of 2021.

Overall, the ERTC is a valuable tool for gyms and fitness centers to retain their employees during the COVID-19 pandemic. By taking advantage of the credit, businesses can save money on their taxes and keep their employees on payroll.

Eligibility and Calculation for Gyms and Fitness Centers

Gyms, studios, and fitness centers can qualify for the Employee Retention Credit (ERC) if they meet certain eligibility criteria. The ERC is a refundable tax credit that can help businesses affected by the COVID-19 pandemic retain their employees. Here are some of the key eligibility requirements for gyms and fitness centers:

  • Revenue Reduction: To be eligible for the ERC, gyms and fitness centers must have experienced a significant decline in gross receipts. Specifically, they must have experienced a 20% or more reduction in gross receipts in any quarter of 2020 or 2021 compared to the same quarter in 2019. Alternatively, they can compare their current quarter’s gross receipts to the same quarter in 2019 and show a 20% or more reduction.
  • Shut Down or Reduced Hours: Gyms and fitness centers that were fully or partially shut down due to a government order or had to reduce their operating hours can also qualify for the ERC.
  • Less Than 500 Employees: Gyms and fitness centers with less than 500 employees are eligible for the ERC.

Once a gym or fitness center has determined that they meet the eligibility requirements, they can calculate their ERC. The ERC is calculated based on the wages paid to employees during the eligible quarters. Here are some of the key calculation factors for gyms and fitness centers:

  • 50% of Wages: For 2020, the ERC is equal to 50% of qualified wages paid up to $10,000 per employee. For 2021, the ERC is equal to 70% of qualified wages paid up to $10,000 per employee per quarter.
  • Retroactively Claimed: Businesses can retroactively claim the ERC for 2020 on their 941 form.
  • $10,000 of Wages Paid: The ERC is calculated based on qualified wages paid to employees. Qualified wages include the cost of employer-provided health care, but not the cost of sick leave or family leave wages paid under the Families First Coronavirus Response Act.

Gyms and fitness centers can benefit greatly from the ERC, which can help them retain their employees during these challenging times. By understanding the eligibility requirements and calculation factors, they can take advantage of this valuable tax credit.

Applying for the Employee Retention Credit

To apply for the Employee Retention Credit (ERC), gym and fitness center owners must complete Form 941 for the applicable quarter(s) and claim the credit on their tax return. The credit is claimed on Form 941, Employer’s Quarterly Federal Tax Return, for the applicable quarter(s). The credit is refundable, which means that if the amount of the credit exceeds the employer’s payroll tax liability, the excess is refunded to the employer.

Gym and fitness center owners may also choose to work with their accountants or tax professionals to apply for the ERC. They can assist with completing the necessary forms and ensuring that all requirements are met.

Once the application is submitted, the IRS will review the ERC claim and issue a refund check if approved. The refund will be issued to the gym or fitness center owner, not the accountant or tax professional who assisted with the application.

If a mistake is made on the original Form 941, gym and fitness center owners can file Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to correct the error and claim the ERC. The amended Form 941-X must be filed for the applicable tax period and signed by the authorized person.

It is important to note that the requirements for claiming the ERC vary depending on the time period for which the credit is claimed. Gym and fitness center owners should review the requirements for each applicable tax period before submitting an ERC claim.

In summary, applying for the Employee Retention Credit involves completing Form 941 or working with an accountant or tax professional to ensure all requirements are met. The credit is refundable, and any excess amount will be refunded to the gym or fitness center owner. If a mistake is made, gym and fitness center owners can file Form 941-X to correct the error and claim the ERC.

Interaction Between PPP and ERC

Gyms and fitness centers that have received PPP funds can still claim the Employee Retention Credit (ERC) for eligible wages paid in 2020 and 2021. However, the same wages cannot be used to calculate both the ERC and PPP loan forgiveness.

The IRS has provided guidance on how to calculate the ERC when the business has received PPP funding. According to the guidance, eligible wages for the ERC are reduced by the amount of PPP loan forgiveness claimed. This means that the wages used for PPP loan forgiveness cannot also be used for the ERC.

Owners of gyms and fitness centers should keep in mind that the ERC is a refundable tax credit, meaning that it can result in a cash refund if the credit exceeds the amount of payroll taxes owed. In contrast, PPP funds are a loan that can be forgiven if certain conditions are met.

Therefore, it is important for gym and fitness center owners to carefully consider how to allocate their funds between PPP and ERC to maximize their benefits. They should consult with their tax advisors to determine the best strategy for their business.

Overall, the interaction between PPP and ERC can be complex, but with careful planning and guidance from tax professionals, gym and fitness center owners can navigate the process and potentially receive significant benefits from both programs.

Regulations and Compliance

To qualify for the Employee Retention Tax Credit (ERC), gyms, studios, and fitness centers must comply with certain regulations and guidelines. The ERC is a refundable tax credit from the Internal Revenue Service (IRS) against certain payroll taxes in 2020 and 2021. It’s essentially more stimulus for your business to help those most affected by the impacts of COVID-19.

Gyms and fitness centers must comply with both federal and state regulations to qualify for the ERC. The IRS has announced a compliance program for the ERC, which includes audits to ensure that businesses are following the guidelines and regulations.

Payroll taxes, including social security tax, must be paid in full to qualify for the ERC. Employment tax returns must also be filed on time. Failure to comply with these regulations may result in penalties and disqualification from the ERC.

Gyms, studios, and fitness centers should keep accurate records of their payroll taxes and employment tax returns to ensure compliance with the ERC regulations. The IRS has provided frequently asked questions about the ERC on their website, which can be found here.

Overall, compliance with the ERC regulations is essential for gyms, studios, and fitness centers to qualify for the tax credit. By keeping accurate records and following the guidelines set forth by the IRS, businesses can benefit from the stimulus provided by the ERC.

Impact on the Fitness Industry

The Employee Retention Tax Credit (ERTC) has been a lifeline for many gyms and fitness businesses struggling to stay afloat during the COVID-19 pandemic. The credit has allowed these businesses to retain their employees, reduce costs, and continue to provide services to their clients.

Capacity restrictions and shutdowns have hit the fitness industry hard, with many gyms and fitness centers forced to close their doors or reduce capacity significantly. The ERTC has helped to ease the financial burden on these businesses, allowing them to continue to operate and provide services to their clients.

Virtual training and personal training have become increasingly popular during the pandemic, and the ERTC has allowed gyms and fitness businesses to continue to offer these services to their clients. Group-based fitness classes have also been impacted by the pandemic, with many businesses forced to reduce capacity or cancel classes altogether. The ERTC has helped these businesses to continue to offer group-based fitness classes and retain their employees.

Big box gyms and established fitness businesses that were in operation before February 2020 have also benefited from the ERTC. These businesses have been able to retain their employees and continue to provide services to their clients, despite the challenges posed by the pandemic.

In conclusion, the ERTC has had a significant impact on the fitness industry, allowing businesses to retain their employees, reduce costs, and continue to provide services to their clients. The credit has been a lifeline for many gyms and fitness businesses struggling to stay afloat during the pandemic, and its impact will continue to be felt in the years to come.

Frequently Asked Questions

How can gyms and fitness centers qualify for the Employee Retention Tax Credit?

Gyms and fitness centers can qualify for the Employee Retention Tax Credit (ERTC) if they experienced a significant decline in gross receipts or were fully or partially suspended due to government orders related to COVID-19. The decline in gross receipts must be at least 20% in any quarter of 2020 or 2021 compared to the same quarter in 2019.

What are the requirements for claiming the Employee Retention Tax Credit for gyms and fitness centers?

To claim the ERTC, gyms and fitness centers must have paid qualified wages to eligible employees during the qualified period. The qualified period for 2020 is from March 13, 2020, to December 31, 2020, while the qualified period for 2021 is from January 1, 2021, to December 31, 2021.

What is the maximum amount of the Employee Retention Tax Credit that gyms and fitness centers can claim?

For 2020, the maximum credit per employee is $5,000, while for 2021, the maximum credit per employee is $28,000. The credit is calculated as 50% of qualified wages paid during the qualified period for 2020 and 70% of qualified wages paid during the qualified period for 2021.

Can gyms and fitness centers located in certain areas qualify for additional tax credits?

Yes, gyms and fitness centers located in certain areas designated as disaster zones by the federal government may qualify for additional tax credits.

Which employees of gyms and fitness centers are eligible for the Employee Retention Tax Credit?

Eligible employees include those who were employed by the gym or fitness center during the qualified period and whose services were not needed due to the suspension of operations or significant decline in gross receipts.

What are the common mistakes to avoid when claiming the Employee Retention Tax Credit for gyms and fitness centers?

Common mistakes to avoid when claiming the ERTC for gyms and fitness centers include failing to properly document eligible wages, failing to meet the eligibility requirements, and failing to claim the credit on time. It is important to consult with a tax professional to ensure that all requirements are met and that the credit is claimed correctly.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top