Starting a business under “normal” circumstances is a journey but if you started a business in 2020 or 2021 it was grueling. How about some free money to take the sting out of it?
The CARES Act, introduced on March 27, 2020 in response to the COVID-19 pandemic, contained a variety of programs designed to get money out to individuals and businesses and to stimulate the economy. One of these programs was the Employee Retention Credit (ERC), which allowed employers to receive a tax credit for qualified wages paid to their employees. The Cares Act was subsequently modified to include ERC funding for startup businesses under a category called recovery startup businesses (RSBs). Eligible employers can receive up to $7,000 per employee, per quarter for the third and fourth quarters of 2021, capped at $50,000 per quarter. To qualify as a recovery startup business the following are the requirements:
- Started business/operations after February 15, 2020; and
- Average annual gross receipts (revenue) for the three-year taxable period ending with the taxable year that precedes the calendar quarter for which the credit is determined does not exceed $1,000,000; and
- Employed W-2 individuals, other than the owner (or owners’ relatives), from July 2021 through December 2021.
Once you’ve determined that you qualify, the next step is to calculate and claim the credit. Below is an example calculation:
Once you’ve calculated the credit, the ERC is claimed through amending your 941 quarterly payroll tax filings. These amended forms are submitted to the IRS and, after a 4 to 6 month estimated processing period, you’ll receive a check from the IRS in the amount of your Employee Retention Credit.
If you’ve not yet examined your eligibility for the ERC, particularly under the startup rules, Seamless Advisors is happy to help. The team at Seamless has processed more than $100 million in ERCs in the last year, including ERCs for numerous startups.
Don’t let this one-time tax credit opportunity pass you by!
For more information check out this article that Chris wrote that further breaks down what ERC is, how your business qualifies, how much it’s worth and how it’s claimed.
About the Author
Chris O’Shell specializes in transaction advisory, fractional CFO/COO services, and tax credit advisory. Chris is a Fort Worth CPA and graduate of Abilene Christian University.
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