Recovery Startup Business: New Criteria Makes ERC Available to New Businesses

What’s New?

Employers that began carrying on a business after February 15th, 2020 may now be eligible for the employee retention credit in the 3rd and 4th quarter of 2021 if they qualify as a Recovery Startup Business.  An employer is considered a Recovery Startup Business if:

  • They did not exceed $1 Million in average annual gross receipts for the three tax years preceding the quarter in which it claims the ERC.
  • They do not otherwise qualify for the ERC because of a loss in revenue or a government mandate forcing them to close or limit capacity.

If an employer does qualify as a Recovery Startup Business, they would be eligible to receive a credit of 70% of up to $10,000 of an employee’s qualified wages in both Q3 and Q4.  Unlike a business that qualifies for the ERC because of a significant reduction in gross receipts or a government mandate, Recovery Startup Businesses may only receive up to $50,000 per quarter.

How Do I Claim the Credit?

Normally, the credit has been claimed through the employer’s share of Social Security tax, but for Q3 and Q4, the credit is claimed against the employer’s share of Medicare tax.  Employer’s may file for an advance of the credit by submitting for 7200.  If these taxes have already been filed, however, the IRS will issue a refund after the 941 has been filed for the quarter and the employer indicates that a credit is due.

It is important that employers maintain documentation proving that they are indeed eligible for the employee retention credit that they claim, as well as accurately calculate the employee retention credit available to them for each employee.  Time & Pay is helping our clients make these calculations, as well as filing all necessary paperwork with the IRS in order for our clients to receive the employee retention credit.  If you think you may be eligible as a recover startup business, because of a significant drop in revenue (20%+), or because of a government mandate forcing your business to close or limit capacity, contact us today for a free consultation!


Author: Andy Scheu
Andy was just six years old when his father started Time & Pay and has watched it grow from a one-man show to an organization with more 15 employees, helping over 800 companies across the country. He was honored to become a part of Time & Pay in 2010 as an account executive and began growing their customer base in the Chattanooga, TN area. Now acting as Director of Marketing and Sales, Andy works to ensure that Time & Pay remains loyal to the mission established by its founder over 25 years ago..."to be the provider by choice of quality, cost effective Payroll, Timekeeping and HR solutions to businesses, that will maximize customer satisfaction, while maintaining our profitability.”

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