What are the eligibility criteria for the Employee Retention Credit (ERC)? Well, the good news is that new businesses can qualify for the credit under certain conditions. Let’s dive into the details!
An “RSV” or Recovery Startup Business refers to an employer that began trade or business operations on or after February 16, 2020. To determine when a business is considered to have started, we look to the guidelines outlined in section 162 of the tax code. Generally, a business is recognized as being operational and actively performing its intended activities.
To be eligible as a recovery startup business, your business must have commenced operations after February 16, 2020. This credit is primarily available for the third and fourth quarters of 2021. Additionally, your business should have average annual gross receipts or total sales of less than $1 million. The calculation of the credit for new businesses follows the same rules as other businesses in 2021, amounting to 70% of employee wages, up to $10,000 per quarter per employee. However, the credit is capped at $50,000 for recovery startup businesses in the third and fourth quarters of 2021.
Recovery startup businesses do not require meeting the usual criteria of shutting down or experiencing a decrease in sales. Instead, they must have paid their employees and not surpassed a specified sales threshold. This makes the Employee Retention Credit an excellent opportunity for new businesses.
So, if you started your business during the COVID-19 pandemic, don’t worry! You can still qualify for the ERC as a recovery startup business. Take advantage of this credit to support your business and its employees during these challenging times.
Want to work with one of our ERC Specialists? Fill out the form today or click here to apply for your Employee Tax Credit.
Don’t hesitate to contact us for any queries about the eligibility criteria for the Employee Retention Credit (ERC).