ERC for Gyms and Fitness Centers
Employee retention credits were intended to offer temporary respite for gyms and fitness centers that were subject to COVID restrictions. But over its existence, this program has undergone several changes, which have increased uncertainty and led to a very slow relief. Read on for a description of the COVID relief program and a description of who is eligible to determine if your gym or health club qualifies.
Payroll Tax Credits
Your gym or athletic club can be qualified to receive a payroll tax credit refund for qualifying earnings received in specific quarters in 2020 and 2021 provided you meet the requirements. Wages earned in 2020 after March 12 and before January 1 of the following year are eligible for a credit of up to $5,000 per employee. For earnings earned before September 30, the maximum payroll tax credit per employee for 2021 might be $21,000.
ERC Qualifications for Gyms and Fitness Centers
Both quantitative and qualitative methods can be used for determining ERC eligibility. Understanding quantitative eligibility is simple. If your gym or athletic center’s 2021 gross receipts decreased by more than 20% from the equivalent quarter in 2019, you meet the gross revenues criteria to qualify. 2020’s gross receipts must have increased by at least 50% to be eligible for the credit.
Because qualitative analysis is less precise, some businesses have misused it. If the operations of your health club or gym were stopped entirely or in part, you are eligible for ERC. If the government decided that your fitness business was no longer needed and decided to close it, all operations would come to a standstill. Your gym’s earnings, while it was closed, are eligible for ERC. When you reopened after being ordered to do so by laws, you undoubtedly had restrictions in place.
A partial suspension of operations is an additional requirement for ERC eligibility. As part of this process, every gym and fitness center receives its own evaluation. Depending on the location and available space, athletic centers may receive a different outcome when determining eligibility. If you believe your gym was not operating at full capacity due to restrictions, the next challenge is gathering the necessary proof to show the government orders you were following. Determine the source of the restrictions. The Occupational Safety and Health Administration and the Centers for Disease Control only issued guidelines. Since these government agencies did not issue any regulations, your gym or health club was not required to adhere to the recommendations made by them.
Who imposed the limitations that resulted in the partial suspension of your gym’s operations—the mayor, the governor, or the county health officials? Find news stories, publications, and the websites of the relevant government agencies to locate the orders that serve as proof of a full or partial suspension of activities and eligibility for the ERC. Write down the particular orders and how they affected the operations of your gym or fitness center. Create a timeline showing the orders’ impact on your company. Keep track of how long each order lasted, including whether it lasted for two months, 12 months, or 15 months. If your fitness business, regardless if its a health club, fitness spa, or local work-out gym was subject to limitations, salaries paid during that specific time frame might be eligible for ERC.
If you have not already, you still have time to determine whether you qualify for the ERC. For your health and fitness-related business, these funds could be a sizable source of income.