What is the Employee Retention Tax Credit (ERTC) as it applies to Closet Storage Concepts?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
maintains balances in excess of the FDIC limit. At December 31, 2023, amounts in excess of the FDIC insured limit was $345,761.
NOTE 11 OTHER INCOME – ERTC REFUNDABLE CREDITS
The CARES Act provides an employee retention tax credit ("ERTC"), which is a refundable tax credit against certain employment taxes for eligible employers. For 2020, the tax credit of up to $5,000 per employee is equal to 50% of qualified wages paid to employees during the year, capped at $10,000 of qualified wages per employee. For 2021, the tax credit of up to $7,000 per employee is equal to 70% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through September 30, 2021. The Company qualified for the tax credit under the CARES Act during 2020 and 2021; therefore, a tax credit in the amount of $776,293 was recognized and included in other income on the statement of operations as of December 31, 2022, which is the year in which the qua
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the Employee Retention Tax Credit (ERTC) is a refundable tax credit provided by the CARES Act for eligible employers against certain employment taxes. For the year 2020, the tax credit was up to $5,000 per employee, equating to 50% of qualified wages paid to employees during the year, with a cap of $10,000 of qualified wages per employee. In 2021, the tax credit increased to up to $7,000 per employee, representing 70% of qualified wages paid to employees during a quarter, also capped at $10,000 of qualified wages per employee through September 30, 2021.
The Closet Storage Concepts company qualified for the tax credit under the CARES Act during 2020 and 2021. As a result, a tax credit of $776,293 was recognized and included in other income on the statement of operations as of December 31, 2022, which is the year in which the qualification was realized. A related receivable is included on the balance sheets as of December 31, 2023 and 2024, in the amount of $413,641, which is comprised of the credit receivable only.
For a prospective Closet Storage Concepts franchisee, this information is relevant in understanding the financial history and tax benefits the company has received. While the ERTC was a temporary measure related to the COVID-19 pandemic, it demonstrates the company's ability to leverage available financial relief programs. It's important to note that the ERTC details provided pertain to the franchisor's experience, and the availability and applicability of such credits to a new franchisee would depend on prevailing regulations and the franchisee's specific circumstances.
It would be prudent for a potential franchisee to consult with a financial advisor or tax professional to understand any current tax credit opportunities and how they might apply to their specific business situation. Understanding the financial strategies employed by the franchisor, such as taking advantage of the ERTC, can provide insights into their overall business acumen and financial management practices.