Recovery Startup Business
Based on the American Rescue Plan Act, a business that opened during the
Covid-19 pandemic may be eligible to receive the credit. The qualifying
factors include:
• You started a business on or after February 15, 2020
• Your annual gross receipts don’t exceed $1 million
• You employ one or more employees
The application process for a Recovery Startup Business is relatively
straightforward. Some essential criteria include:
1. You must employ one or more employees (Not including family or
owner)
2. You began operations on or after February 15, 2020
3. Your gross receipts total under $1 million for 2020 and 2021
individually
4. You must not be eligible under any other ERC requirements
5. You paid employees during the 3rd and 4th quarters for 2021
If you started your business during the 2nd quarter of 2021, you aren’t
eligible to claim any credits for 2020 or the first two quarters of 2021.
However, businesses that meet the government restriction criteria or new
revenue reduction may be eligible for credit for earlier quarters.
The ERC for 2020 is 50% of all qualified wages you paid your employees
from March 12, 2020 to December 31, 2020. There’s a limit of $10,000 in
wages per employee for each quarter.
For 2021, the available credit is for 70% of qualified wages you paid your
employees from January 1, 2021, to September 30, 2021. There’s a set limit
of $10,000 in wages for each employee for any quarter.
This means you can claim up to $7,000 per employee per quarter. The
maximum allowed credit is $21,000 for each employee.
If your business is deemed a recovery startup business, the total credit
allowed is $50,000 per quarter. Any wages you paid through December 31.
2021 are eligible.
You are no longer limited to wages you paid by September 30, 2021. A
recovery startup business is one that began operating after February 15,
2020, and has annual gross receipts not exceeding $1 million.
Typically, qualified wages are the compensation you pay your employees.
This includes qualifying health plan expenses.
The definition also depends on how many people you employed in 2019. If
you weren’t in business then, it depends on your average number of
employees in 2020.
If you provide health benefits to non-working employees, those benefits may
be considered qualified wages. These benefits vary depending on your
insurance status.
