ERC for Barbershops and Beauty Salons
Barbershop and beauty salon owners may be eligible for a federal tax credit that provides them access to hundreds of thousands of dollars. We offer details on how hair cuttery owners with employees who were impacted by the pandemic can apply for the Employee Retention Tax Credit (ERC).
The ERC, a federal payroll tax credit, was established to assist companies that were impacted by the pandemic in continuing to pay their employees. The ERC was established by the CARES Act of 2020, and it has since undergone several changes up until the end of 2021. Although retroactively, the ERC is still accessible to qualified businesses including hair salons or barbershops.
ERC Qualifications for Barbershops and Beauty Salons
Having a team of employees is the first qualification. If you do not have any staff, this will not apply to you. The following stage is to demonstrate how COVID-19 affected your barbershop or beauty salon. You must provide proof that you fall under either of these two categories:
A government-ordered shutdown that either entirely or partially halted your hair salon operations cost you money.
In 2020, your hair cuttery’s revenue fell by at least 50%, and in 2021, it fell by 20%.
PPP Loan
Can barbershops or beauty salons use the Employee Retention Credit if they receive a PPP loan? They can. As was already stated, one of the best features of the new law is that it enables taxpayers to submit ERC claims as well as apply for PPP loans. Businesses in need of cash infusions in 2020 more frequently turned to PPP loans as a source of funding rather than the ERC because the CARES Act did not initially authorize this overlap. The new law extends the deadline for PPP loans and ERC claims to March 12, 2020. As a result, barbershops and hair salons that received PPP loans in 2020 (or that will receive new loans in 2021) can now research potential ERC credits for 2020 and 2021.
