Have you heard about the latest stimulus from the IRS to help small businesses, known as the Employee Retention Credit? 

If you haven’t yet, buckle up! 

The Employee Retention Tax Credit is even better than the PPP funding you’re most likely familiar with. 

Our fitness business clients have received an average $57,000 in cash back from the IRS, and 2021 isn’t even over yet! 

With this blog post, we will explain the Employee Retention Credit in detail, why you may not have heard about it yet, and why your gym most certainly qualifies for thousands of dollars from the IRS right now. 

Let’s dive in. 

 

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“I thought, “No Way!?” Is this a prank? We’re getting back $116,323! The Fitness CPA was the only business that let us know that ERC was even available. It will help us tremendously, especially after the challenges we have faced over the past 14 months.”  

Peter Blumert, Prevail Conditioning

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What is the Employee Retention Credit? 

The Employee Retention Credit is a refundable tax credit from the IRS against certain payroll taxes in 2020 and 2021. It’s essentially more stimulus for your business to help you navigate the consequences of COVID-19. You can read the nitty-gritty details here.

And it’s not that new – it came out as part of the original CARES Act passed back in March 2020. 

However, back in March 2020, businesses had the option to take part in PPP funding OR take the Employee Retention Tax Credit (ERC). In virtually every case, it made much more sense for a business to take the PPP funds.

However, fast forward to 2021, and the rules have changed.

As of earlier this year, businesses can now claim the Employee Retention Credit AND PPP – meaning most fitness businesses qualify for tens of thousands of dollars that they weren’t eligible for before. 

And the best part is? Unlike PPP, there are no spending restrictions, and you never have to pay this money back! 

It’s essentially free money for your fitness business!

Great. How much cash can I actually receive? 

While we won’t get into the nitty-gritty calculations in this post (you can read more about them here), it’s safe to say that your gym is most likely owed tens of thousands of dollars. 

As a quick summation: most gyms are eligible to receive up to $33,000 per employee, if qualified.

So let’s dig into that $33,000 per employee a little bit more.  Why is it so much?

$5,000 per employee in 2020

For 2020 entire year the credit is 50% of wages up to $10,000 of wages paid.  That means qualifying businesses are eligible for up to $5,000 per employee for 2020.  If you paid less than $10,000 per employee, don’t worry – you will receive a proportionate share of the credit.

$28,000 per employee in 2021

For the 2021 year the credit was increased to 70% of wages.  And instead of being $10,000 for the year, it is $10,000 per quarter in 2021.  That mean’s qualifying businesses are eligible for up to $28,000 per employee for 2021 (broken out into $7,000 per quarter)

For example, if you have 5 employees, that means up to $165,000 back in tax credits.

If you have 10 employees, you can expect $330,000 in tax credits. (Yes, one of our clients is getting back $365,000!)

Depending on the number of employees you have, the amount of refund you’ll receive can really add up.

To  find out if your gym qualifies in the first place, you can use our 60-second quiz here:

Ok. Well why haven’t I heard about it yet? 

There are several reasons why the Employee Retention Credit isn’t as popular as other funding programs, such as PPP and EIDL. 

To begin with, there have been a lot of rule changes since the ERC first came into legislation. It has only been a few months since the tax credit became the powerhouse stimulus that it is today. 

I.e. Prior to December 2020, it simply wasn’t that lucrative for your CPA to chase after.

Another reason why the ERC isn’t as popular yet is because the calculations for the Employee Retention Credit are complex even for the most qualified accountants. 

There is a lot of work that goes into the calculations, and quite frankly, a lot of accountants are staying away from it because they aren’t sure how to do it.

Note, this doesn’t mean you shouldn’t apply for the ERC.

In fact, now that you know about it, it’s critical that you do.

However, it’s important to understand that the Employee Retention Credit is still being figured out by even the most experienced accountants, and may explain why it hasn’t been brought up as an option until now.

So, how do I receive the Employee Retention Credit?

As mentioned, we recommend using an experienced accountant (who has completed a lot of ERC applications!) to apply on your behalf. 

Determining the exact calculations of your tax credit is going to be the most complex part. (There are many factors to consider, including revenue per quarter, government shutdown regulations, eligible wages, PPP funding, and more.)

After the calculations are complete, your accountant can claim your credit immediately by amending your payroll tax returns. 

And after this, you will receive a refund in the form of a check!

Right now at The Fitness CPA, we’re making it even easier. 

If you are a gym or fitness business, we will calculate the exact tax credit amount for your business – whether you are a client of ours or not – at zero cost.

How it works is simple.

We will ask you for a few documents (like revenue figures and payroll reports) and get to work calculating exactly how much money you could receive back.

Once you receive the free calculation, you can either proceed with the work or jump out at any point. It’s truly no obligation to you.

And this isn’t a sales pitch!

We just really want to help as many fitness businesses as possible, especially through this challenging time.

We love this industry, and the government money is there for the taking. Why not help as many businesses as possible access it?

If you’d like to see how many thousands of dollars you can receive back for your gym or fitness business, get started with your free calculation here.

Until next time!

The Fitness CPA