Key insights
- There is employee retention credit (ERC) money expressly set aside for new businesses that many have not pursued.
- Recovery startup businesses can claim the ERC regardless of whether they had a suspension of operations or a decline in gross receipts.
- Qualifying businesses can claim up to $100,000.
Want to learn more about ERC? Check out our office hours.
Don't miss out on ERC expressly for new businesses
The employee retention credit (ERC) is an incredibly popular and beneficial pandemic-era tax credit. You may not be aware that the government also set aside ERC money expressly for new businesses for Q3 and Q4 of 2021, even if they don’t meet the usual eligibility criteria.
Learn how the recovery startup credits work and how you might use them.
Eligibility as a recovery startup business
Your company may be a recovery startup business if it started operations after February 15, 2020, and has annual gross receipts of less than $1 million. The ERC for 2021 is equal to 70% of qualified wages paid to each employee, subject to a cap of a $7,000 credit per employee per quarter and $50,000 total credit per quarter. Between Q3 and Q4 of 2021, that’s a credit of up to $100,000. The $50,000 per quarter limit does not apply if you qualify for the ERC based on the normal eligibility criteria discussed in the next section, so an even more lucrative credit may be available.
More eligibility options for 2021 employee retention credits
One way to qualify for the ERC is to show that your gross receipts for the quarter are less than 80% of those in the same quarter in 2019. You remain eligible for each successive quarter where your gross receipts declined 20% or more compared to the same quarter in 2019 through Q3 of 2021.
The “trailing quarter” rule can qualify you for additional eligibility. You can look back to the immediately preceding quarter, and if you meet the 20% decline in gross receipts in that previous quarter, you are automatically eligible for the current quarter. Don’t miss this opportunity. Apply for employee retention credits today.
For example, if in Q4 of 2020, your receipts are 20% less than those in Q4 of 2019, you meet the 20% decline test for Q1 of 2021 even if Q1 2021 did not itself meet the required 20% decline.
Don’t miss this opportunity. Apply for employee retention credits today.
Another way to qualify is to show that governmental orders fully or partially suspended your operations. To qualify under this suspension test, you must demonstrate the government order had a more than nominal impact on operations. This could mean a significant portion of your operations were suspended or modifications required by the order had a substantial effect on your ability to serve customers.
For example, if a government order required your manufacturing business to implement social distancing from January 1, 2021 through June 12, 2021, which reduced production capacity by 20%, then you would qualify for the credit from January 1, 2021 through June 12, 2021. CLA can evaluate whether a suspension or modification satisfies the eligibility requirements.
How CLA can help with employee retention credits
You can file for 2021 ERC credits through April 15, 2025. Reach out to CLA to confirm eligibility and guidance through the process.
We’re hosting ERC office hours August 8, 13, and 21. RSVP here with your name, email, and any questions you have so we can send you a link to a Teams meeting.
We’ll answer the most common fact patterns using the statute, IRS notices, and guidelines available. If you need a more specific consultation, reach out to your CLA advisor.
Contact us
Curious if you qualify for recovery startup or general employee retention credits? Complete the form below to connect with CLA.
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