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Recovery Startup Business Employee Retention Credit IRS | Employee Retention Credit Startup Business | Employee Retention Credit for Startup Busi

Recovery Startup Business Employee Retention Credit IRS  |   Employee Retention Credit Startup Business  |  Employee Retention Credit for Startup Business

 

The COVID-19 pandemic was challenging for almost all small businesses.  Despite this, some companies launched during the COVID-19 pandemic.  If you established a business after February 15, 2020, you might qualify as a Recovery Startup Business and be eligible for the Employee Retention Credit (ERC).  Let's look at the requirements and talk about the benefits.

 

What Is the Employee Retention Credit?

The ERC is a refundable tax credit based on specific qualifying factors.  It was initially part of the CARES Act of 2020 and was designed to help struggling business owners continue employment due to the pandemic.

There have been many revisions along the way, including the American Rescue Plan of 2021. One of the changes resulting from the American Rescue Act of 2021 was the addition of the "Recovery Startup Businesses.  

 

What is a Recovery Startup Business?

If a business opened its doors during the pandemic and meets the following criteria, it may be eligible for the credit;

  • The business started on or after February 15, 2020.
  • Your annual gross receipts are less than $1 million for the individual years 2020 and 2021.
  • The business has one or more W2 employees, not including owner-operators or family members.

Suppose you launched a takeout and food delivery business with five employees on April 1, 2020.  Your company earned $800,000 for 2020 and $900,000 for 2021.  Your business would be considered a Recovery Startup Business and a perfect candidate for the ERC.

If you purchased an existing business that was in operation on or before February 15, 2020, you may or may not be considered a Recovery Startup Business.  Some unique rules apply under these circumstances, and it would be best to work with ERC tax experts can help determine your eligibility.

 

What Can My Business Claim?

If your business qualifies as a Recovery Startup Business, you can receive a $7,000 credit per worker per quarter.  As a Recovery Startup Business, the maximum credit is limited to $50,000 for the year's final two quarters.  The gross receipts mustn't exceed the $1 million annual revenue limit for the 2020 and 2021 tax years.

Let's say you have eleven employees.  If you multiply eleven employees by $7,000 per employee in quarter 3, you get $77,000; however, your business is limited to $50,000 unless your business can qualify under revenue reduction or governmental orders.  When you perform the same calculation for quarter 4, you also come to $77,000 with the same limitation; however, only Recovery Startup Businesses can qualify in the 4th quarter of 2021.  As a startup with eleven employees, eligible for the last two quarters under the rules for Recovery Startup Business, you'd receive a $100,000 check from the IRS.  That's a significant amount of money!

 

Deadline for 2020: April 15, 2024

Deadline for 2021: April 15, 2025

 

 

Also, See

 

Employee Retention Tax Credit (ERTC) Service

How do you claim the ERC?

Database of COVID National, State and Local Shutdown Orders

 

Other State Credits and Incentives

Georgia Top Credits & Incentives

Georgia Retraining Tax Credit

Georgia Job Tax Credit

Georgia Quality Jobs Tax Credit

Georgia Investment Tax Credit

Georgia Port Bonus Tax Credit

Tennessee Top Credits & Incentives

Standard, Enhanced, Super Job Tax Credits

Industrial Machinery Tax Credit

South Carolina Top Credits & Incentives

Mississippi Top Credits & Incentives

 

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