Employee Retention Tax Credit for Hotels
The COVID-19 pandemic has hit the hospitality industry hard, with hotels and restaurants among the worst affected. However, there is good news for hotel owners who are struggling to keep their businesses afloat. The Employee Retention Tax Credit (ERTC) is a financial relief program that offers cash benefits to eligible businesses. Hotels and resorts can also receive tax relief through the ERTC program, which awards up to $26,000 per W-2 employee.
How the ERTC can benefit hotels
The ERTC can provide a significant cash benefit for hotels that meet the eligibility criteria. This program is designed to help businesses retain their employees during the pandemic, by providing financial incentives to keep them on the payroll. The ERTC offers four separately calculated credits, with a maximum of $7,000 per employee per quarter in 2021.
Eligibility criteria for the ERTC
To qualify for the ERTC, hotels must meet either the government mandate test or the gross receipts test. The government mandate test applies to businesses that were fully or partially suspended due to COVID-19 government orders. The gross receipts test applies to businesses that have experienced a decline in gross receipts of 50% in 2020 or 20% in 2021 compared to 2019.
How hotels can benefit from the ERTC
Hotels and resorts can receive tax relief through the ERTC program, even if they have received PPP loans or Shuttered Venue Operator Grants. The ERTC program has been expanded for 2021 and applies to the first three quarters. Hotel owners should review their eligibility for the ERTC to determine whether they can benefit from this program.
How the ERTC Works for Hotels
The Employee Retention Tax Credit (ERTC) is a refundable tax credit that provides financial relief to businesses that have experienced a decline in revenue due to the COVID-19 pandemic. Hotels and resorts can benefit from the ERTC program, which offers up to $26,000 per W-2 employee.
Four separately calculated credits
The ERTC offers four separately calculated credits, with a maximum of $7,000 per employee per quarter in 2021. These credits are calculated based on the number of employees, the amount of wages paid, and the amount of qualified health plan expenses.
Maximum ERTC amount per employee per quarter in 2021
The maximum amount of the ERTC per employee per quarter in 2021 is $7,000. This means that hotels can receive up to $28,000 per employee for the entire year.
Qualification criteria for the ERTC
To qualify for the ERTC, hotels must meet either the government mandate test or the gross receipts test. The government mandate test applies to businesses that were fully or partially suspended due to COVID-19 government orders. The gross receipts test applies to businesses that have experienced a decline in gross receipts of 50% in 2020 or 20% in 2021 compared to 2019.
Eligibility for businesses that received PPP loans
Hotels and resorts can also qualify for the ERTC program, even if they have received PPP loans or Shuttered Venue Operator Grants. However, the same wages cannot be used for both the ERTC and PPP loan forgiveness.
According to ERC Guaranteed, the ERTC program has been expanded for 2021 and applies to the first three quarters. This means that hotels can receive up to $21,000 per employee in 2021.
Overall, the ERTC program offers a valuable opportunity for hotels to receive financial relief during these challenging times.
How to Qualify for the ERTC
To qualify for the ERTC, hotels must meet certain criteria. The eligibility requirements for the ERTC are based on two tests: the government mandate test and the gross receipts test.
Government mandate test
The government mandate test applies to businesses that were fully or partially suspended due to COVID-19 government orders. This means that if a hotel was forced to shut down or limit its operations due to government orders during the pandemic, it may be eligible for the ERTC.
According to ERC Specialists, hotels that have experienced a decline in demand due to COVID-19 government orders may also be eligible for the ERTC. This includes hotels that have experienced a decline in occupancy rates or room rates due to government orders.
Gross receipts test
The gross receipts test applies to businesses that have experienced a decline in gross receipts of 50% in 2020 or 20% in 2021 compared to 2019. This means that if a hotel's revenue has decreased significantly due to the pandemic, it may be eligible for the ERTC.
Hotels can calculate their eligibility for the ERTC using the gross receipts test using either the calendar quarter or the calendar year. According to Frost & Associates, hotels can use the prior quarter's gross receipts to determine eligibility for the current quarter.
Other eligibility criteria
Hotels that have received PPP loans or Shuttered Venue Operator Grants can still qualify for the ERTC program. However, the same wages cannot be used for both the ERTC and PPP loan forgiveness.
According to Clarus WOTC, hospitality businesses can claim the Employee Retention Tax Credit (ERTC) if they had a substantial decline in revenue, were shut down due to governmental orders, or began a new trade with less than $1 million in annual revenue. The ERTC benefits include a maximum credit of $5,000 per employee for 2020 and $7,000 per employee for 2021 quarters 1-3.
Overall, hotels should review their eligibility for the ERTC to determine whether they can benefit from this program and receive monetary relief during these tough times.
How to Claim the ERTC
Hotels that meet the eligibility criteria for the ERTC can claim the tax credit on their federal employment tax returns. Here's how to claim the ERTC:
Determine the amount of the credit
The amount of the ERTC that a hotel is eligible for depends on the number of employees and the amount of qualified wages paid during the eligible period. According to Clarus WOTC, the ERTC is equal to 70% of qualified wages paid to employees, up to a maximum of $10,000 per employee per quarter. This means that the maximum ERTC amount per employee per quarter in 2021 is $7,000.
Claim the credit on Form 941
To claim the ERTC, hotels must report the credit on their quarterly employment tax returns, which are filed using Form 941. According to CBH, hotels can claim the credit on Form 941 beginning with the second quarter of 2021.
Claim refunds for prior periods
Hotels that did not claim the ERTC for prior periods can file amended employment tax returns to claim refunds for those periods. According to ERC Guaranteed, hotels can claim refunds for the 2020 tax year by filing Form 941-X for the relevant quarter.
Get assistance from tax professionals
Claiming the ERTC can be complex, especially for hotels that have received PPP loans or other forms of aid. As such, hotels may want to consider getting assistance from tax professionals to ensure that they are claiming the credit correctly and maximizing their refunds.
Overall, hotels that meet the eligibility criteria for the ERTC should take advantage of this valuable opportunity to receive financial relief during these challenging times.
Final Thoughts
The Employee Retention Tax Credit (ERTC) can provide significant financial relief to hotels that have been impacted by the COVID-19 pandemic. By meeting the eligibility criteria and properly claiming the credit, hotels can receive up to $28,000 per employee in 2021.
Importance of reviewing eligibility
Hotels should review their eligibility for the ERTC program, even if they have received other forms of aid such as PPP loans or Shuttered Venue Operator Grants. The ERTC can provide additional financial relief and is available to businesses that have experienced a decline in revenue due to the pandemic.
Importance of claiming the credit correctly
Hotels should take care to claim the ERTC correctly to ensure that they receive the maximum refund possible. This may involve working with tax professionals to navigate the complex rules and requirements of the program.
Take advantage of the ERTC
Overall, the ERTC is a valuable opportunity for hotels to receive much-needed financial relief during these challenging times. By meeting the eligibility criteria and claiming the credit correctly, hotels can take advantage of this program and get the financial help they need to survive and thrive.
Learn More About the ERTC and Other Hotel Tax Breaks
We hope this article has been helpful in explaining the Employee Retention Tax Credit (ERTC) and how hotels can benefit from it. If you want to learn more about the ERTC or other hotel tax breaks, be sure to check out the following resources:
- IRS guidance on the ERTC
- CBH guide to the ERTC for hotels and restaurants
- ERC Specialists guide to the ERTC for hotels and resorts
- Clarus WOTC guide to the ERTC for hotels and motels
Check out our other great content
If you found this article helpful, be sure to check out our other great content on hotel management, marketing, and operations. We strive to provide valuable insights and information to help hotels succeed in today's competitive market.
FAQ
Who is eligible for the employee retention tax credit for hotels?
Hotels that have experienced significant declines in gross receipts or were subject to governmental orders limiting operations.
What is the maximum amount a hotel can receive through the ERTC?
Hotels can receive up to $28,000 per employee in 2021.
How can hotels claim the ERTC?
Hotels can claim the ERTC on their federal employment tax returns using Form 941.
What if a hotel already received PPP loans or other forms of aid?
Hotels that received PPP loans or other forms of aid may still be eligible for the ERTC.
How can hotels ensure they are claiming the ERTC correctly?
Hotels can work with tax professionals to navigate the complex rules and requirements of the ERTC.
What resources are available to learn more about the ERTC for hotels?
The IRS, CBH, ERC Specialists, and Clarus WOTC all offer helpful guides and resources on the ERTC for hotels.
