Hotels and resorts have been significantly impacted by the COVID-19 pandemic, with many experiencing reduced occupancy and revenues. To help these businesses weather the storm, the Employee Retention Credit (ERC) was created as part of the CARES Act. This refundable payroll tax credit encourages employers to keep employees on the payroll, even if they aren’t working during the covered period due to the pandemic.

Eligibility for the ERC

To be eligible for the ERC, a hotel or resort must have experienced either a full or partial suspension of operations due to a governmental order related to COVID-19, or a significant decline in gross receipts. The ERC is available for wages paid to employees during the period of the suspension or decline in gross receipts.

In addition, the ERC is available for businesses with 500 or fewer employees. This means that even smaller hotels and resorts may be eligible for the credit.

Claiming the ERC

To claim the ERC, hotels and resorts will need to file a tax return and complete Form 5884-C, Employee Retention Credit for Employers Affected by COVID-19. They will also need to provide supporting documentation, such as payroll records and copies of any governmental orders that led to the suspension of operations or decline in gross receipts.

It’s important to note that the ERC is a refundable credit, which means that if the credit exceeds the amount of tax you owe, you may receive a refund for the excess amount. The ERC is available for tax years 2020 and 2021.

Conclusion

The ERC is a valuable resource for hotels and resorts that have been affected by the COVID-19 pandemic. By keeping employees on the payroll and claiming the ERC, these businesses can help weather the storm and come out stronger on the other side. It’s important to carefully review the eligibility requirements and rules for the ERC to determine if your hotel or resort is eligible for the credit. Do you have questions regarding the ERC Tax Credit program? Contact us for a complimentary consultation.