ERC or Employee Retention Credit is a tax credit that gives companies a monetary incentive to keep employees on the payroll. This tax credit is available to all companies, regardless of size or industry, and it can be applied with the help of an ERC specialist. Click here to learn more about the eligibility criteria to qualify for ERC.
As ERC was expanded in March 2021, startup businesses or new businesses can now receive a tax credit as a “Recovery Startup Business.”
For qualifying as a “Recovery Startup Business” and to be eligible for tax benefits, here are some criteria:
- Began operations on or after February 15, 2020
New businesses can qualify for ERC as Recovery Startup Businesses if they began their operations on or after February 15, 2020. These businesses will get a tax credit for the payroll that was incurred before the business’s first full year of operations. Small businesses can seek the help of an ERC specialist to come up with the right strategy to maximize their ERC tax credit.
- Maintains average annual gross receipts that do not exceed $1 million
To be eligible for the tax credit as a Recovery Startup Business, the company should maintain average annual gross receipts that do not exceed $1 million. With the help of an ERC specialist, startups can come up with a financial plan if their average annual gross receipts are less than $1 million. The tax credit can be of great help for startups to boost cash flow and lessen their financial hardship incurred during times of COVID.
- Employs one or more workers
To be qualified as a Recovery Startup Business, the company should employ one or more workers. In this stage of operations, startups can maximize their ERC tax credits by hiring a small number of part-time employees. An ERC specialist will help by suggesting the right strategy to maximize ERC benefits.
- Does not otherwise qualify for the Employee Retention Credit
To be qualified as a “Recovery Startup Business,” your business should not qualify for the Employee Retention Credit. This is because the ERC credit can only be paid to businesses that are already in full-year business or have been continuous for two consecutive years. As a startup, your company should have just started operations to be qualified as Recovery Startup Business. An ERC specialist can help your startup by figuring out the right strategy and maximizing your ERC tax credits.
