You might be qualified for a federal tax credit that gives barbershop and salon owners access to hundreds of thousands of dollars. We have information on how to claim the Employee Retention Tax Credit (ERC), which is available to business owners with employees affected by the pandemic.
Let me start by addressing your primary concerns: Yes, this is true, and yes, it is free money. However, it’s a government initiative designed especially for company owners who have staff. According to Naomi Prusinski, CEO of Be Better Salon Accelerator, salons have successfully obtained ERC with values ranging from $46,000 to $262,000. Naomi and her business partner Shannon Lopez assist salons in navigating the complex IRS terminology and submitting ERC applications.
What is the ERC?
A federal payroll tax credit known as the ERC was created to help businesses affected by the pandemic continue to pay their employees (and off unemployment). The ERC was created by the CARES Act of 2020 and has undergone several revisions until recently, as of the end of 2021. The ERC is still available to qualified companies retroactively.
Is the Employee Retention Credit A Loan?
It’s important to note that the ERC is NOT a loan and cannot be deferred in any way; repayment is not required. Qualifying salons can apply for this tax credit on their quarterly payroll payment. You will get a check from the IRS if the credit exceeds the amount you paid in federal unemployment taxes.
How Much Does the ERC Give?
The ERC granted employers a credit in 2020 equal to 50% of the eligible wages paid to employees between March 12, 2020, and the end of 2020. The maximum credit for each employee in 2020 is $5,000. The tax credit increased to 70% of the first $10,000 in eligible wages per quarter in 2021, with a cap of $7,000 per employee per quarter. Each employee may only receive up to $26,000 in credit.
Do I Qualify?
To begin, you must have employees. This will only apply to you if you do. The next step is to prove that COVID-19 impacted your company. You must demonstrate that you fit into any of these two categories:
- You lost money due to a government-mandated shutdown that entirely or partially stopped your business operations.
- At least a 50% revenue decline for your company occurred in 2020, and a 20% decline occurred in 2021.
You must demonstrate one of these scenarios on a quarter-by-quarter basis to be eligible for the ERC for 2021.
Have any questions? Our support team is here to help you with any questions or issues you might have. We take care of the hard work, so you never have to worry about it! Our team of professionals works to ensure that your company receives the full ERC credit it is entitled to. Contact us to find out more about ERC credits and how we can assist you.