The short answer is Yes! Car dealerships do qualify for the Employee Retention Credit (ERC). Your car dealership must have between 5 and 500 employees, and either
1. had to partially or fully shutdown any time in 2020 or 2021, or
2. had at least a 20% loss in gross receipts for any quarter.
If you experienced either of the above, you qualify for up to $28,000 per employee.
To find out exactly how much you will receive in ERC funds, fill out the short form below:
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Can car dealerships qualify for the employee retention credit?
The Employee Retention Tax Credit is one of the more exciting new tax breaks for car dealerships. This credit is designed to help retain qualified employees, and provides a refundable tax credit to eligible employers. These credits can be worth a few hundred dollars for every employee. While the credit is designed for all employers, some businesses may be better off taking advantage of the benefits of the program. Those in the auto repair business might even qualify for some of the credit’s benefits, such as paying for health insurance.
The IRS has a helpful guideline to help business owners identify which tax breaks they qualify for. Specifically, the agency has published a list of eligible taxpayers and their payroll tax credits. It is also worthwhile to seek guidance from an accountant or a tax lawyer to ensure you are getting the most out of the program. You might be surprised at the number of small businesses that are eligible for the ERC. A small dealership might only have 50 full-time workers, but a larger group of dealers at various locations might be subject to aggregation.
To find out whether or not you are eligible for the ERC, you will need to perform some tests. For example, do you have any suspended operations, and if so, what are the effects of this on your business? If you have more than a handful of employees at any given location, do you have any part shortages or other problems with your supply chain? All of these issues could have a big impact on your bottom line.
The Employee Retention Tax Credit is a hot topic in tax circles, and there are many companies out there that have taken advantage of it. Dealerships that were hit hard by the coronavirus pandemic and other unforeseen economic consequences might be able to capitalize on the tax break. However, to claim the credit, the employer must be one of the eligible businesses. In order to be eligible, the auto dealer must also be involved in a major governmental directive such as the COVID Act of 2017.
The Employee Retention Tax Credit is lauded for its novelty amongst other business owners. However, the ERC is not for everyone, and it is not without its flaws. In addition to the aforementioned, there are other reasons why you should not take this credit for granted. Among other things, the tax credit is not available to employers that have received PPP loans. Thus, you will want to make sure you do not double dip, or in some cases, triple dip.
Another question that might arise is the size of the tax credit you can claim. It is important to note that the credit is not a grant, but rather a tax credit based on a small percentage of your gross receipts. As such, the ERC might not be the best fit for all dealerships.
Can car dealerships qualify for the employee retention credit during the COVID-19 pandemic?
In the wake of the COVID-19 pandemic, many businesses have been forced to suspend operations and/or reduce their hours. This includes car dealerships and other transportation companies. But can these businesses qualify for the Employee Retention Tax Credit? These companies can qualify for this credit if they meet specific criteria.
The CARES Act, which was passed in March of 2020, included an Employee Retention Credit (ERC). It provides a credit to help businesses meet their payroll obligations in the aftermath of the COVID-19 pandemic. If a business qualifies, it will receive a tax refund. To qualify, an employer must pay employees for at least one hour per day, with at least half of those hours in the month of April. Additionally, employers are allowed to claim this credit for wages paid between March 12, 2020, and the end of the tax year, which is on April 15, 2021.
Businesses that qualify can claim up to $28,000 in ERC credits per year. As a result, the credit can be larger than the amount of Paycheck Protection Program loans an employer may receive. However, an employer is limited to a total of $33,000 in credit per employee in the 2020-2021 tax year.
For the first two quarters of the 2021 tax year, the gross receipts reduction threshold has been reduced from 50% to 20%. This change may help some dealerships that previously faced difficulties claiming the ERC.
Employers must also demonstrate that the full or partial shutdown of their business activities constituted a significant decline in gross receipts. They must also have fewer than 100 full-time employees in their business. A small business can claim ERC on all wages paid during the eligible period. Small employers can also claim the credit for all wages paid for workers who were not working during that time.
Employers can calculate the ERC by dividing the qualified wages by the number of full-time employees in the business. Each employee is allowed a maximum of $10,000 in qualifying wages. If an employee works at least 30 hours a week, that person is considered a full-time employee. Likewise, an employee who works less than 30 hours a week is considered a part-time employee.
The IRS has issued guidance on the Employee Retention Tax Credit. However, it is important to note that the rules are still somewhat subjective. Therefore, you should consult with a qualified accountant or legal counsel if you think your business is likely to be affected by the pandemic.
Dealerships that have more than one location should consider aggregating their employees across locations. In addition, they should be wary of consultants who make aggressive claims. Many of these consultants were unaware of the ERTC when it was introduced. There is a risk that they will misinterpret your situation and attempt to take advantage of you.
Can car dealerships qualify for the employee retention credit because of partial disruption in the supply chain?
The employee retention tax credit (ERTC) is a harbinger of good news for car dealerships. Fortunately, the ERTC is not as elusive as it may sound, especially if you enlist the help of a qualified tax professional. In fact, the CARES Act has already made the tax incentive a reality for many businesses.
The ERTC is not only for big business, however, but small businesses also benefit from it. If your automotive shop isn’t on the payroll of a large corporation, or if you have a handful of full-time employees, you are eligible. However, you should know that there are rules of the road, and you might have to break them.
One of the more complex aspects of the ERTC is figuring out if your business is a part of the larger picture. For example, if you own a franchised auto dealership that has locations across the country, it is likely that each location has its own unique aforementioned challenges. This makes it even more important to consider how each dealership is performing in terms of customer service, financial performance, and overall operational effectiveness. A cursory study of recent dealership activity suggests that most operations are not running at their peak level. Additionally, it’s unlikely that you’ll find a dealership that hasn’t experienced some form of disruption to their supply chain. Fortunately, the IRS has a few suggestions on how to best handle such an eventuality.
The ERTC is not the only federal tax incentive for the automotive industry. There is also the Paycheck Protection Program, which is designed to protect the financial well-being of low-wage workers. Similarly, the aforementioned CARES Act includes a host of other incentives for employers. These include a slew of tax credits and benefits, as well as programs to help businesses navigate through uncertain times.
The CARES Act, and specifically the Employee Retention Tax Credit, has been instrumental in providing much needed relief to an otherwise teetering automotive industry. While the ERTC isn’t the be all and end all, it’s been a boon to many companies in the past few years. That’s why it’s such a good idea to speak with a qualified professional about your company’s particular situation. From there, you’ll be able to snag the tax relief you need and deserve. It’s a worthwhile exercise for any business looking to improve its bottom line. You can learn more about the CARES Act by visiting the aforementioned website.
The CARES Act may have its shortcomings, but it is definitely worth a look. In addition to the aforementioned ERTC, there are many other options available to auto dealers, from state and local subsidies to tax incentives. Take advantage of the opportunity before it’s too late.