BIG Tax Savings from the Employee Retention Credit (ERC)

Originally Published : January 28, 2021

Dear Governor Cuomo,

How are we supposed to have any confidence in you when you play with our emotions and our livelihoods like you’re manipulating the pitch and volume of a theremin?   Every movement from you has us screaming or wailing or humming and usually pulling our hair out.  You reject us on Monday with the dire message that – no how, no way- will you reopen restaurants and then you flirt with us on Wednesday by teasing us to tune in on Friday for some big restaurant related news?  Please spare us  the dramatic cliffhangers, double talk and indecisiveness.  We have had enough.

Bars and restaurants have been your scapegoats since day one of this pandemic as every time you feel the heat, you shut us down like that’s going to solve the problem.  It’s become your knee jerk reaction as a way to appease the masses and  although we yell and scream and lobby,  you continue to ignore the needs of the industry. We need a steady hand steering the ship Governor.  Shame on you for treating us so badly and you should know that opening at 25% does not make it all better.  

At this point, let people make some decisions for themselves and allow restaurants to reopen at 50% capacity.  The risks of eating out are well-documented, owners have proven that they are taking it  all very seriously and solid safety protocols are in place. It’s time to start treating restaurants in NYC like those in the rest of the state and let people dine out if they feel safe doing so.  

Now, back to you, our beloved HL clients and friends with some better news…

PPP applications are being approved and the money should start being distributed in the next couple of weeks.  With the onset of vaccinations, we have seen a significant uptick in industry optimism as evidenced by many new deals coming across our desks.

Landlords are offering spaces at reduced rents and developers are building and hiring F&B operators for their projects.  Deals that were stalled are being revived and restaurateurs are raising money and planning for their post-pan businesses. Our firm has never been busier so I can say with full confidence that NYC and hospitality will be coming back strong in the second half of 2021. Of course it will . We are New York City, the center of the world.

BIG TAX SAVINGS – READ THIS! I know tax stuff can be tough to digest, but this is worth it as it will save you a good chunk of money, so buckle down and read it please.

Employee Retention Credit by Scotto & Melchiorre, CPA’s

The passing of the new stimulus bill allows small businesses, which have previously received PPP loan forgiveness, to also obtain an Employee Retention Credit (“ERC”).  The ERC allows employers to claim a refundable payroll tax credit of up to $5,000 per employee in 2020 and $14,000 per employee in 2021. For any payroll quarter for which this credit is eligible, a business’ payroll tax liability could very well be eliminated, with the remaining ERC benefit to be received via IRS refund check.
Example:  A qualifying restaurant or bar with 20 employees could receive up to $100,000 of ERC’s for 2020 and an additional $280,000 for 2021
The ERC is a refundable payroll tax credit that is only available to businesses who:

  • Had their business fully or partially suspended during a quarter(s) in 2020 as directed by government mandate; or
  • 2020: Experienced a larger than 50% decline in revenues for any quarter in 2020 compared to the same quarter in 2019; or
  • 2021: Experienced a larger than 20% decline in revenues for either Q1 or Q2 2020 compared to the same quarter in 2019 (or prior calendar quarter). 

If you had less than 100 FTE in 2019, all of your employee wages paid during the aforementioned periods would be eligible to receive a credit, provided the same wages were not, or will not, be used to claim PPP forgiveness.

The deadline to file for 2020 ERCs is July 31, 2021. We recommend having an Employee Retention Credit Study (“ERC Study”) performed for Clients.   

An ERC Study :

  • Provides requisite contemporaneous documentation, technical IRS audit support and payroll tax filing processes to obtain these benefits for 2020 and 2021;
  • Focuses on Clients’ status as a “Qualified Employer”, including:
    • Documented detail review, write-up, and ERC supporting arguments of Clients’ business segments to identify elements that were partially or fully suspended due to COVID-19 related government orders;
    • Sample elements identified may include supply chain disruption, employee travel restrictions, and remote employee operational changes;
    • Comparative Client data analysis supporting identified elements affected by COVID-19;
    • Analysis of reduced alternative gross receipts test.
  • Includes detailed “Qualified Wages” computations evaluating the use of PPP funds for payment of employee wages in order to identify the optimal amount of wages qualifying for the ERC without double counting the forgiven PPP loan proceeds.

Please contact Greg Scotto at: [email protected] for more information.


HL TO FILE LAWSUIT AGAINST DELIVERY COMPANIES by Maya Petrocelli, Chair, Litigation Group

Are you relying on third-party delivery companies such as Grub Hub, Seamless and Caviar to keep your business afloat while indoor dining mandates remain in place? If so, please listen up!

In May 2020, NYC passed a law that delivery fees cannot exceed 20% of the total order, exclusive of taxes. However, it has come to our attention that some of these delivery companies (ahem…Grub Hub and possibly others) may have been incorrectly including taxes in the “total order amount” and then using that number to calculate the 20% fee of the order! Now, we’re doing something about it! 

The litigation group is gearing up to file a lawsuit against these delivery companies for their scummy behaviors and we looking for clients who have experienced such trickery to come forward and join us. Depending on the number of clients, we may launch the lawsuit as a class action! If your business utilizes a third-party delivery business, but you are unsure about whether you have been duped, please reach out to Maya Petrocelli, the Chair of the Litigation Practice Group, to discuss this further at [email protected]We will happily look into the circumstances for you—at no charge—and determine whether you qualify to join the litigation.

R.I.P Cloris Leachman, brilliant in both Young Frankenstein and The Last Picture Show and Hank Aaron, one of baseball’s all-time greatest players.