The Employee Retention Tax Credit (ERTC) is a refundable credit that eligible businesses can claim on certain wages paid to their employees. This credit can be claimed through December 31, 2021 by qualified employers who retained employees during the pandemic.
Most auto repair shops will not meet the eligibility requirements for this credit. In order to qualify, your business must have been shut down to some degree by government order, or you must have experienced a significant decline (at least 20%) in gross receipts in a 2021 quarter as compared to the corresponding 2019 quarter. Auto repair shops were considered an essential business – they were never ordered to shut down. Therefore, you will only qualify if you had a significant drop in sales in 2021.
For businesses that do qualify, wages that are subject to FICA taxes are eligible (as well as qualified health plan expenses) as long as they are also not forgiven or expected to be forgiven under the PPP. (It is important to note that the full-time equivalent calculation used for PPP forgiveness eligibility is not the same way to calculate FTE for the ERTC. For the ERTC, a FTE is defined as one who, in any one 2019 calendar month, worked at least 30 hours per week or 130 hours in said month.)
Though there have been quite a few changes to the rules of this credit over the last several months, the credit remains at 70% of qualified wages, up to $10,000, per employee, per quarter for all of 2021. So, up to $28,000 per employee total for 2021.
If you think you may qualify for this credit, or have additional questions or concerns, reach out to your accountant or trusted financial professionals.
An auto repair shop “may” qualify due to supply chain issues.
If they could not get a part because a supplier was impacted due to restrictions, and they couldnt facilitate getting that part from any place else, they might have standing see below. Additionally, even if the shop had higher sales, they might have even had a better year, had it not been for the disruption.
Supply Chain Disruption
For an employer to claim a full or partial suspension due to a governmental order that impacts its supplier it must consider all the relevant facts and circumstances. These include:
The supplier’s ability to make deliveries of critical goods due to a governmental order;
The employer’s ability to purchase critical goods from an alternative supplier; and
The consequence on the business due to the inability to purchase critical goods.