For some businesses, 2020 and 2021 will be their worst years ever.
Businesses in the hospitality or entertainment industries were the hardest hit by the COVID-19 pandemic and the resulting lockdowns. Restaurants, bars, gyms, and concert venues; any business relying on in-person socializing experienced significant disruptions.
To help distressed businesses make it through these tough times, the federal government legislated unprecedented stimulus levels. The Paycheck Protection Program (PPP) tends to get the most attention, but the American Rescue Plan (ARP) was full of grants, loans, and tax credits for businesses of all shapes and sizes.
Among the grants and loans passed in the 2021 legislation were:
- An expanded version of the Employee Retention Credit (ERC), giving qualifying businesses a refundable quarterly credit for up to 70% of max $10,000 in quarterly wages per employee.
- Restaurant revitalization grants
- Severely distressed business credits
The trouble is, most qualifying business owners probably wouldn’t know where to start. The available credits, grants, and loans can confuse business owners and their advisors alike.
But as a CPA, you’re in a perfect position to help these potential clients out.
As a side note, that information might help you identify potential new clients. Businesses in your local hospitality industry would appreciate a CPA who could help them maximize their benefits from the ARP…
Severely Distressed Business Credit
The severely distressed business credit comes out of the ARP and is related to the ERC. The name implies ERC coverage for the most severely distressed employers.
To qualify as a severely distressed employer, a business needs to have experienced a 90% decline in 3rd or 4th quarter gross receipts in 2021 vs. the same quarter of 2019. Generally, the ERC considers only wages paid to not-working employees for large employers.
However, severely distressed employers experiencing such a profound loss of sales (90%) can consider all wages paid to all employees – even those who continued to work. This credit has the potential to make a massive difference for your clients.
Restaurant Revitalization Fund Grants (RRF)
These grants apply primarily to businesses in which patrons gather for the primary purpose of being served food or drink. In other words: mainly bars and restaurants. Be aware that companies receiving funds from the Shuttered Venues program may not also receive funds from the RRF.
Generally speaking, the RRF grant is equal to the loss of revenue that the business experienced in 2020 due to the pandemic. Up to $5 million per location (max $10 million across affiliated sites), these grants are not required to be paid back.
The grant payments are required to be used to cover specific types of expenses:
- Payroll
- Mortgage or rent
- Utilities
- Maintenance
- Food and beverages within the normal scope
However, any funds leftover must be returned at the end of the covered period.
Your Role as a CPA
While these are challenging times, they can also be exciting times to help businesses grow. It’s important to note that some of the greatest companies ever emerged during a major crisis.
That potential isn’t only for your clients; it also exists for you. As we wrote in Accounting Today, Sensiba San Filippo leveraged the challenges of the 2008 financial crisis to refocus the firm. They turned a significant setback (ca. 40% loss in revenue) into a huge opportunity. The pandemic could be the perfect opportunity for you too.
These government programs are complex topics. There are a lot of details and nuances to sort out.
As a CPA, you’re in the perfect position to help the hardest-hit businesses use these funds to keep their severely impacted businesses afloat. You have a responsibility to your clients to ensure that they’re getting all of the benefits they qualify for.
Tri-Merit can help you help them. No one can be an expert at everything. Tri-Merit is a dependable partner with a specific focus on specialty tax topics.
BE MORE CONFIDENT IN WHO YOU TRUST TO ADVISE YOUR CLIENTS.
We understand what it’s like for CPAs to question whether they have selected the right specialty tax partner. The right partner will have proven expertise and services to enhance the relationship between client and CPA. This is why Tri-Merit serves as an extension of the CPA’s advisory team to reinforce the CPA’s role as a trusted advisor while helping taxpayers increase cash flow through specialty tax incentives.
Schedule a discovery call at 800.624.1076 to give your clients the best possible experience with a partner you can trust.
R&D tax credit | Cost segregation | 179D | 45L | Employee Retention Credit | WOTC
