ERTC for Restaurants and Hospitality Businesses: Maximizing Your Claim

The COVID-19 pandemic hit the restaurant and hospitality industries harder than nearly any other sector. From mandated shutdowns and social distancing rules to supply chain breakdowns and staffing shortages, thousands of restaurants, hotels, and event venues experienced significant disruptions. To help offset these losses, the federal government introduced the Employee Retention Tax Credit (ERTC)—a refundable payroll tax credit aimed at helping employers retain staff and survive economic hardship.

If you’re in the restaurant or hospitality business, the ERTC could mean tens or even hundreds of thousands of dollars back in your pocket. But claiming the full amount you’re eligible for requires knowing the rules—and how to apply them to your specific circumstances.

Here’s how to maximize your ERTC claim and avoid leaving money on the table.

1. What Is the ERTC?

The Employee Retention Tax Credit (ERTC) was established under the CARES Act and extended by subsequent legislation to support businesses that kept employees on payroll during COVID-19-related disruptions.

Key Features:

• Refundable payroll tax credit

• Up to $5,000 per employee in 2020

• Up to $7,000 per employee, per quarter for the first three quarters of 2021 (maximum of $21,000 per employee)

• Can be claimed even if you received a PPP loan, as long as wages aren’t double-counted

2. Why Restaurants and Hospitality Businesses Qualify

The IRS provides two main ways to qualify for the ERTC:

✅ 1. Government-Mandated Shutdowns

If your restaurant or hospitality business was fully or partially closed due to a government order (indoor dining restrictions, limited capacity, event bans, etc.), you likely qualify—even if you pivoted to takeout or outdoor dining.

✅ 2. Significant Revenue Decline

• In 2020, you qualify if your gross receipts declined 50% or more compared to the same quarter in 2019.

• In 2021, the threshold was lowered to a 20% decline compared to 2019.

Many restaurants and hospitality venues experienced this drop in revenue, especially during the height of the pandemic.

3. Understanding Qualified Wages

Qualified wages include wages paid to employees during eligible periods, plus certain health plan expenses. The amount of wages you can claim depends on your average full-time employee count:

• For 2020, if you had 100 or fewer full-time employees, you could claim wages paid to all employees, working or not.

• For 2021, that threshold was raised to 500 full-time employees.

This means many restaurants and hotels with smaller teams can claim wages for all staff retained, regardless of whether they were actively working.

4. Maximize Your Claim with These Tips

🔍 Tip 1: Document Every Government Order

Keep records of:

• Indoor dining bans

• Reduced capacity requirements

• Event limitations

• Curfews or hour restrictions

These orders can be used to support eligibility for the credit, especially under the partial suspension test.

💡 Tip 2: Don’t Overlook Non-Tipped Wages

Tipped wages over $20/month per employee are included in qualified wages for ERTC purposes—so your servers' base pay and tips both count (up to the wage cap).

🧾 Tip 3: Avoid Double-Dipping with PPP

If you received a Paycheck Protection Program (PPP) loan, you must segregate wages used for loan forgiveness from those claimed for ERTC.

But good news: you can still claim ERTC, even if you received PPP funds—just be sure you're not using the same payroll for both programs.

👥 Tip 4: Include Health Insurance Costs

Employer-paid health insurance premiums for eligible employees can also be included in qualified wage calculations—boosting your total credit.

📅 Tip 5: Consider the Lookback Rule

In 2021, if your revenue in a given quarter didn’t meet the 20% decline threshold, you could still qualify by applying the Lookback Rule, using the prior quarter’s revenue drop instead.

5. How to Claim the Credit

To claim ERTC, you must:

1. Calculate eligible wages per employee, per quarter.

2. File Form 941-X to amend previously submitted payroll tax filings.

3. Keep thorough documentation in case of an audit.

💼 It’s highly recommended to work with a CPA or ERTC specialist to ensure your claim is accurate, complete, and fully optimized.

The ERTC Can Be a Game-Changer for Hospitality Recovery

The ERTC provides significant financial relief for restaurants, bars, hotels, caterers, and other hospitality-related businesses. But to receive the maximum benefit, you must understand how the rules apply to your operations, staffing, and revenue.

Key Takeaways:

• Restaurants and hospitality businesses are highly likely to qualify due to mandated shutdowns or revenue losses.

• Tip wages, health benefits, and smaller headcounts can all boost your claim.

• PPP recipients can still claim ERTC with careful wage tracking.

• You can claim retroactively by amending your payroll tax filings.

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