If you’re anything like our current clients, you’re probably skeptical of why so much money in tax refunds and credits is available from the Employee Retention Credit.
“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. Lottery winner!”
Peter Blumert, Prevail Conditioning
So, why can fitness businesses get so much money back?
That’s what we’ll answer for you with this blog post.
Let’s dive in.
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 more about ERC in our previous blog post here.
While previously not so relevant due to its clash with PPP funding, recent changes in legislation have brought the Employee Retention Credit, or ERC, back to the forefront for those most affected by COVID (that’s you!).
As of December 2020, you can now receive the Employee Retention Credit for your business even if you took funding from the Paycheck Protection Program (PPP) as well.
This means thousands of dollars for your fitness business are up for grabs.
Why are gyms and fitness businesses getting back so much money from the employee retention credit
So, let’s get to the thousand dollar question:
“Why are gyms and fitness businesses getting back so much money from the employee retention credit?”
The simple answer is that:
- Almost every fitness business qualifies. We’ve written about this before and you can check that out here: Why Gym, Studio, & Fitness Owners Qualify for Thousands in ERC $$$ (even if you don’t think you do)
- The credit is retroactive back to the beginning of 2020, continues through all of 2021, and is worth up to $33,000 per employee.
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 means qualifying businesses are eligible for up to $28,000 per employee for 2021 (broken out into $7,000 per quarter).
As an example, if you have 5 employees, that means your business could earn up to $165,000 back in tax credits! In fact, one of our clients is getting back $365,000.
“We are potentially receiving $365,000! We were shocked… and still are. I still don’t believe we are actually receiving this much in refund checks and credits. Eric and his team spent countless hours researching these credits and performing the work for clients. The Fitness CPA is one step ahead and provides great value for clients.”
Billy Macaulay Title Boxing Club
However, there are a few factors to consider, and the amount of money you’ll actually receive depends on your unique business situation.
Factors to consider include:
- How many months your business was subject to city, county or state regulations that reduced your capacity or completely shut down operations.
- Which quarters in revenue decreased by 50% or more in 2020 compared to 2019.
- Which quarters in revenue decreased by 20% or more in 2021 compared to 2019.
- Which wages you used PPP funding for during 2020 and 2021.
There are even more factors to take in, such as how many months after a qualifying quarter it took the business to recover, but we’ll leave the more complex factors to the calculations themselves. (These calculations are tricky for even the most qualified accountants.)
And there are a few criteria that can disqualify you altogether:
- If your business started after February 15, 2020, you are not qualified for ERC.
- If you have more than 500 employees, you are not qualified for ERC.
- If you don’t have any employees (and you don’t pay yourself a wage as an owner), you are not qualified for ERC.
Curious if your fitness business or gym qualifies for ERC?
So, How Do I Receive This Cash?
First, you’ll need to find an accountant with experience in Employee Retention Credits to calculate an accurate proposal for you.
Unfortunately, this might be harder than you’d think.
We spoke about why most accountants aren’t across ERC as well as you’d hope in our blog post here.
In short, the calculations are much trickier than they seem, and the work involves going back and amending all previously submitted tax returns for 2020 and 2021. It’s no wonder many accountants are staying well clear!
For the last few months, we’ve invested hundreds of hours in finding the most strategic ways to retroactively claim the tax credit in combination with PPP, and maximize the savings for our clients.
And now, we’re opening our doors to help all gym and fitness studio owners – whether you’re a client or not.
If you are a fitness business or gym, we will calculate the tax credit for your business at zero cost to you.
There is nothing to lose!
Once you receive your free calculation, you can either proceed with the work, or jump out at any point. It’s truly no obligation to you.
If you decide to go ahead with the work, after finding out exactly how much you’ll receive, we’ll handle everything in its entirety from our end.
And in a little bit, you’ll receive a refund check from the IRS. It’s that simple!
And to get started, we’ve made it pretty easy. You can jump straight into the calculations and we’ll calculate your ERC for free.
As you can see, we’re pretty excited about the Employee Retention Credit. In fact, we can’t believe just how much money is up for grabs right now in terms of small business stimulus.
If you have a question or concern, you can reach out to me personally at any time by filling in our Get in Touch page.
In the meantime, you can check out our Ultimate Guide To The Employee Retention Credit to help with any questions you may have:
Until next time!
- What is a Deemed Election and How Does it Affect Your Employee Retention Credit Refund? - August 15, 2023
- Paying Workers: Employees vs. Contractors for Gyms & Fitness Businesses? - March 28, 2023
- 3 Employee Retention Credit Tips You’d Pay a CPA For - March 6, 2023