It is evident that the COVID-19 Pandemic has changed the way we live and work. It has also created numerous challenges for business owners. From health and safety mandates to logistical problems, the ability to stay profitable has become an issue for many.
The Employee Retention Credit (ERC) has been a lifesaver to many businesses affected by the pandemic. The ERC is a refundable credit claimed on your quarterly payroll tax filings. With the passing of the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the ERC was enacted back in March 2020. Businesses could receive a payroll tax credit under ERC for one of two reasons. The first being that the business had a decline in gross receipts during the years 2020 and 2021 when compared to 2019. The second being that the business experienced a full or partial closure due to a government-issued mandate.
Since the original CARES Act there has been subsequent legislation modifying and revising the credit. One of the modifications made was to create the Recovery Startup Business (RSB), which has created another way for businesses to qualify for the ERC.
A recovery startup business (RSB) is an employer that does not qualify for the ERC under either of the first two eligibility gateways (gross receipts decline or full or partial suspension) for the third quarter of 2021. In addition, only RSBs can qualify for the fourth quarter of 2021. The RSB must have also commenced a trade or business after February 15, 2020. In addition, to qualify as an RSB, the average annual gross receipts over a three-year lookback period (prorated for periods less than three years) must not exceed $1 million.
While eligible employers are generally limited to a credit of $7,000 per employee per eligible quarter for ERC, an RSB is limited to a total credit of $50,000 per quarter in the third and fourth quarters of 2021 for all of their employees.
If you meet the criteria for a recovery startup business, you owe it to yourself to take advantage of the ERC. While it’s widely available to many startups that launched during the pandemic, it’s often overlooked. The ERC can give you the extra cash you need to meet a variety of business goals. For additional information reach out to one of our professionals today.