Employee Retention Credit: Why Central Perk, Cheers, and Dunder Mifflin Would Qualify 

The employee retention credit (ERC) program is helping organizations across the country claim significant pandemic financial relief (retroactively, of course, for 2020 and 2021). When an eligible employer (from every type of trade or business) is claiming the credit, they’re receiving up to $26,000 per employee.  This adds up, and some employer credits are $1 million, $2 million, or even higher.  The process to claim the ERC is a complicated, IRS-driven procedure involving tax returns and documents like Form 941X.  However, with assistance from employee retention credit experts (like those at MP), it’s possible to claim the employee retention credit with a streamlined, audit-proof process.  To explain why an organization might be eligible for the ERC, here are three familiar examples of probable ERC recipients.  If your company encountered similar challenges, you’re also likely to be able to claim an employee retention credit. 

3 Examples of (Fictional) Employee Retention Credit Recipients 

1. Central Perk Café from Friends. 

The Central Perk Café, like many other cafes, coffee shops, and restaurants, would be very eligible for an employee retention credit.  The first reason they’d qualify is because they’d probably have completely shut down for a significant period at the beginning of the pandemic to comply with government orders.  If they paid employees or paid for their benefits during this time, these expenses would qualify.  After they were allowed to re-open, the café would continue to qualify for an ERC because they’d likely have to reduce their customer capacity and require customers and employees to socially distance. (This would be especially impactful to a busy, crowded NYC coffee shop.)  As a third qualifying factor, these changes might have caused them to experience a significant decline in gross receipts, which would also qualify them for an ERC.  Like many businesses in the foodservice industry, the Central Perk Café’s gross receipts would also be likely to drop due to a general reduction in business because customers like Ross, Rachel, and Joey might be concerned about going to public places in the height of the pandemic.  The last qualifying factor would be staffing challenges.  Central Perk could argue they weren’t able to serve its usual volume of customers because they had to reduce staff on duty (like Gunther), to meet government orders for social distancing.  

2. The Cheers Bar. 

Bars, like the fictional Cheers bar would be, are often eligible for large employee retention credits because they are adversely affected by the pandemic in various ways.  The first reason the Cheers Bar would be eligible for an ERC is because it would be completely shut down for the beginning of the pandemic to meet a Boston or Massachusetts government order.    If they paid employees or paid for their benefits during this time, these expenses would qualify.  The second reason the Cheers bar would qualify for an ERC is because later, after it could open, the bar would still be subject to heavy social distancing and pandemic safety measures, including reducing customer capacity or lining up potential bar patrons outside to wait.  Additionally, the Cheers bar would be hit with more government orders that curtailed its hours and ability to sell alcohol.  These factors alone would be enough to dramatically reduce the Cheers bar’s gross receipts.  However, their gross receipts would also probably be significantly reduced due to a general aversion to bars and places where people gather and drink (with masks off, obviously) during the pandemic.  Lastly, as with the Central Perk Café, the Cheers Bar would also qualify for an ERC because it would likely have to reduce its staff on duty to comply with government orders.  This would make it challenging for them to serve its usual volume of customers.  Quarterly revenue in 2020 or 2021 for the Cheers bar would likely be dramatically lower than revenue from a calendar quarter in 2019. 

  

3. The Dunder Mifflin Paper Company. 

The Dunder Mifflin company, like many business services and product companies, would easily qualify for a sizeable ERC.  The first factor would be that the company had to shut down to meet a Pennsylvania government order and that their manufacturing employees had to work remotely.  This would likely impact the company’s ability to perform its work at the same level and continue to ship out its usual paper sales orders.  Another reason Dunder Mifflin would succeed in claiming a large ERC is because their gross receipts would be down dramatically, even after they could return to work.  So many businesses are no longer buying paper or the same quantities of paper because their employees are working entirely remotely.  Compared with a calendar quarter from 2019, any calendar quarter earnings in 2020 or 2021 would probably be reduced enough to qualify Dunder Mifflin for a significant employee retention credit.  The last reason Dunder Mifflin would qualify for a large ERC is because, like many other businesses, they’d have staffing difficulties (especially with their warehouse and in-person roles, which could feel riskier during the pandemic).  With these staffing challenges, Dunder Mifflin would be unable to meet its paper shipping needs.  This would profoundly impact their gross receipts from 2020 through the third quarter of 2021 (when the program eligibility ends).