Fiscal year 2020 was tough on just about all business, and the future of 2021 is very much uncertain. Few industries have been hit harder than the wine industry.
When it comes to bottled wine sales, much of a winery’s revenue comes from bulk sales to restaurants, most of which have been closed entirely, or have seen a severe reduction in business and seating capacity, resulting in little to no additional wine orders. But bottled wine sales are only one part of the wine industry’s revenue. The other major revenue stream is tourism, which has all but come to a screeching halt. This is before you factor in the devastating wildfires that destroyed much of California’s wine country in 2020.
It’s been a tough go for many in the wine industry for over a year now. Luckily, there is some relief in sight. That relief is Employee Retention Credits.
Employee Retention Credits (ERC) are a tax credit to reward wineries who have kept their staff employed during these tough economic times. It was created as an extension of the Coronavirus Aid and Economic Relief (CARES) Act, and now is expanded through 2021 under American Rescue Plan Act. As a winery, you qualify for these tax credits if you were forced to shut down fully or partially, either through government orders or due to a sharp decrease in business OR if your gross receipts have fallen below 50% quarter-over-quarter from 2019 to 2020, and 80% from 2019 to 2021.
You can claim up to $5,000 for each full-time employee you retained on your payroll from March 13th to December 31st of 2020 for 2020, and up to $28,000 for each retained employee for all quarters of 2021. You can claim your ERC either through a tax refund or by reducing your payroll tax payments. If your ERC will exceed your payroll taxes, you can request a direct refund from the IRS.
You are still eligible even if you received a Paycheck Protection Program (PPP) loan. The only stipulation is that you cannot claim the ERC credits for payroll costs obtained in forgiveness of your PPP loan.
You chose to keep your employees on your wineries’ payroll despite the tough economic times you have endured during the COVID-19 pandemic. The ERC can help your business by reimbursing you for this added financial strain. These tax credits can be used however you like, not just payroll. You can use them to support other elements of your winery such as renovations and marketing.
We are urging all those, who believe they are qualified, in the wine industry to claim their ERC as soon as possible. As your client advisory services firm, Allen Wine Group is here to assist if you need help filing for your tax refund or applying the ERC to your current payroll taxes. We bring over thirty years of experience in the wine industry and are ready to assist you with bookkeeping, financial statements preparation, wine compliance, and advisory counsel. Contact us today for a consultation.