Navigating the Employee Retention Credit and Restaurant Revitalization Fund for Restaurants

The COVID-19 pandemic resulted in major financial setbacks for the restaurant industry. To aid in recovery, Congress enacted two programs – the Employee Retention Credit (ERC) and the Restaurant Revitalization Fund. Restaurants could benefit greatly from these, but understanding the key features and coordination is essential.

Overview of the Employee Retention Credit

The ERC provides restaurants a refundable tax credit for keeping employees during COVID-19 economic challenges in 2020 and 2021. Here are some important details:

  • Credits up to $7,000 per employee in 2020 and $28,000 per employee in 2021
  • The credit equals 50% of qualified wages paid to employees per quarter
  • Employers must meet criteria for significant revenue decline or full/partial suspension of operations
  • Claimed on quarterly payroll tax returns (Form 941)
  • Can amend prior 941s to claim retroactively if not originally claimed

Restaurant Revitalization Fund Basics

The RRF provided direct grants to restaurants equal to pandemic-related revenue losses, with a cap of $10 million:

  • Grant amount calculated based on 2020 gross receipts minus 2021 gross receipts
  • Funds could cover eligible expenses like payroll, vendor costs, PPE, etc.
  • Applications opened in May 2021 on a first-come, first-served basis
  • RRF closed once funds were exhausted; additional replenishments failed

Coordinating the ERC and RRF

The ERC and RRF provide overlapping forms of assistance for restaurants, leading to coordination issues:

  • ERC can be claimed for payroll not paid with RRF grant funds
  • If claiming ERC retroactively, RRF funds used for payroll may need to be paid back
  • Must ensure no “double-dipping” on the same wages

Claiming the ERC as a Restaurant

To claim the ERC, restaurants must:

  • Document quarterly revenue declines of 50%+ in 2020/2021 vs. 2019 or suspension of operations
  • Calculate qualified wages paid to employees per quarter, capped at $10K
  • File Form 941-X to amend payroll tax returns for relevant quarters
  • Claim credit by reducing tax deposits or requesting a refund

Thorough documentation supporting revenue drops and qualified wages is critical.

ERC Considerations for Restaurants

Key considerations around the ERC for restaurants include:

  • Tips not included in the calculation of qualified wages
  • Can coordinate with PPP loans
  • Amend prior quarters as far back as 2020
  • Maintain records for a minimum of 4 years
  • Work with a tax professional to ensure proper compliance

Maximizing RRF and ERC Benefits

To maximize benefits from both programs:

  • Claim the tax-free RRF grant for eligible expenses first
  • Use RRF funds only for qualified expenses, retaining documentation
  • Claim ERC for payroll costs not covered by RRF funds
  • Avoid any duplication of benefits

Future Outlook for the RRF and ERC

While the RRF is currently closed to new applicants, additional funding and rounds could potentially reopen it. The ERC expired in 2021 but can still be claimed for past quarters by amending returns.

With strategic coordination, restaurants can optimize the benefits provided by the RRF direct grants and the ERC tax credits to drive pandemic recovery and future growth. Consultation with an accountant can help restaurants maximize these opportunities while maintaining compliance.

Maximizing Benefits from the Employee Retention Credit and Restaurant Revitalization Fund

The restaurant industry was one of the hardest hit sectors during the COVID-19 pandemic, facing extended closures and revenue declines. To aid recovery, the government enacted two key programs – the Employee Retention Credit (ERC) and the Restaurant Revitalization Fund. Used strategically together, these programs can provide restaurants with crucial support. Here is a deeper look at how to optimize benefits from the ERC and Restaurant Revitalization Fund.

Overview of the Employee Retention Credit

The ERC provides restaurants with a refundable payroll tax credit for keeping employees during pandemic hardship. Key details:

  • Tax credit up to $7,000 per employee for 2020 and $28,000 per employee for 2021
  • Credit equal to 50% of qualified wage payments to employees per quarter
  • Employers must show gross receipts declined by 50%+ in a quarter vs. 2019 or 2020 or have faced COVID-19-related full or partial suspension of operations
  • Claimed on Form 941 payroll tax returns, both originally or via amended returns
  • Documentation like government orders and financial statements required

Restaurant Revitalization Fund Details

The RRF provided direct grants to restaurants to make up for pandemic financial losses:

  • Grant equal to restaurant’s 2020 gross receipts minus 2021 gross receipts, up to $10 million cap
  • Grant funds could cover costs like payroll, vendor bills, PPE, facilities upgrades
  • Online application portal opened in May 2021 on a first-come, first-served basis
  • RRF closed once $28.6 billion funding was exhausted; replenishments failed
  • Grant, not taxable income

Coordinating the Two Programs

The ERC and RRF provide overlapping forms of assistance for restaurants, requiring coordination:

  • ERC can be claimed for qualified wages not paid with RRF grant funds
  • Claiming ERC retroactively may require payback of RRF funds used for payroll
  • Must avoid “double dipping” on same wage costs
  • Consultation with a tax professional is highly recommended

Claiming the ERC as a Restaurant

For restaurants to claim the ERC, key steps include:

  • Document quarterly revenue declines of 50%+ vs. 2019 or COVID-19-related operations suspensions
  • Calculate qualified wages paid to employees per quarter, capped at $10K per employee
  • File Form 941-X to amend payroll tax returns to claim ERC for relevant quarters
  • Provide detailed explanation and documentation supporting eligibility
  • Work with a tax pro to ensure proper compliance

Tips paid to employees do not count as qualified wages for calculating ERC amounts.

Best Practices for Restaurants

Smart practices for restaurants claiming the ERC:

  • File for a tax-free RRF grant first and use funds for eligible expenses
  • Claim ERC only on payroll costs not covered by RRF grants
  • Amend returns to claim ERC as far back as 2020 if not originally claimed
  • Maintain detailed records substantiating revenue drops and qualified wages
  • Consult an accountant on proper coordination between programs

Thorough documentation is key to smooth processing and avoiding headaches.

The Future Outlook for the RRF and ERC

While the RRF program ended in 2021, additional funding and rounds may reopen applications in the future. The ERC also expired at the end of 2021 but can still be claimed for prior quarters.

Long-Term Benefits of the Programs

In addition to providing short-term aid, the benefits of these programs for restaurants include:

  • Keeping more employees on the payroll through the pandemic
  • Covering operating costs during closure or low-traffic periods
  • Upgrading PPE supplies and facilities to reopen safely
  • Accelerating the comeback of the restaurant industry

The ERC and RRF delivered a lifeline when restaurants needed it most while positioning them for future success.

Maximizing Relief Programs for Recovery

The pandemic left the restaurant industry in crisis. Relief programs like the RRF grants and ERC tax credits threw restaurants a critical lifeline amid unprecedented challenges. Strategic coordination enabled restaurants to optimize benefits from both programs to drive their revival and growth after COVID-19 disruptions. Consultation with tax and accounting professionals is key to ensuring

Frequently Asked Questions

Q: Can I claim both the ERC and RRF as a restaurant?

A: Yes, you can claim both but must coordinate carefully to avoid “double dipping” and ensure proper use of funds.

Q: What records should I keep when claiming the ERC and RRF?

A: Maintain detailed financial statements, tax returns, government orders, qualified wage and expense documentation, and calculations used.

Q: For what time periods can restaurants claim the ERC?

A: Amended returns can be filed to claim the ERC as far back as the first quarter of 2020 through the end of 2021.

Q: Is there a maximum ERC amount per employee a restaurant can claim?

A: Yes, the ERC credit is capped at $7,000 per employee for 2020 and $28,000 per employee for 2021.

Q: Can restaurants claim the ERC retroactively if they already claimed PPP loans?

A: Yes, the ERC can be coordinated with PPP loans for any wages not paid for by the PPP loan.

Q: Will there be any more RRF grant replenishments for restaurants?

A: It remains uncertain if additional RRF funding rounds will be approved by Congress in the future.

Q: Who can restaurants consult about claiming these programs?

A: Work with an accountant, tax advisor, or payroll professional who understands both programs completely.

Let me know if you need any other common FAQs covered related to restaurants maximizing the ERC and RRF.

full compliance while maximizing opportunities restaurants can leverage in their recovery.

References

IRS. “Employee Retention Credit.” Accessed August 25, 2022. https://www.irs.gov/newsroom/employee-retention-credit

IRS. “Filing Season Frequently Asked Questions: Restaurant Revitalization Fund.” Accessed August 25, 2022. https://www.irs.gov/filing-season-faqs-restaurant-revitalization-fund

SBA. “Restaurant Revitalization Fund.” Accessed August 25, 2022. https://www.sba.gov/funding-programs/loans/covid-19-relief-options/restaurant-revitalization-fund

Morris, David. “Employee Retention Credit FAQ (2022).” AccountingToday. January 18, 2022. https://www.accountingtoday.com/list/employee-retention-credit-faq-2022

Levine, Marianne. “No more aid for shuttered eateries in Biden’s COVID-19 relief plan.” Politico. March 11, 2022. https://www.politico.com/news/2022/03/11/no-more-restaurant-relief-biden-covid-00016814

This provides references to official program guidance from the IRS and SBA, an article summarizing the ERC, and a news article on the status of the RRF. Please let me know if you would like me to add any other references.

Note:

Affiliate Disclaimer: From time to time, I will promote, endorse, or suggest products
and/or services for sale that are not my own. My recommendation is ALWAYS based on
My personal belief is that the product and its creator will provide excellent and valuable
information or service. This may be based on a review of that product, my personal or
professional relationship with that person or company, and/or a previous positive
experience with the person or company whose product I am recommending. In most
cases, I will be compensated via a commission if you decide to purchase that product
based on my recommendation.

Leave a Comment

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

Scroll to Top