Employee Retention Credit for Recovery Startup Businesses
The ERC is a “thank you present” from the IRS for keeping employees on payroll during the pandemic. Businesses can retroactively claim the ERC as long as it has employees, not contractors.
We have been qualifying our clients using the factors below.
- The business was partially or fully suspended by a government authority due to COVID
- The business experienced a significant decline in gross receipts (in 2020 less than 50% of gross receipts for the same calendar quarter in 2019, and in 2021 less than 80% of gross receipts in the same calendar quarter in 2019)
- The business is considered a recovery startup business
We covered the first two bullets in our article here.
In order to qualify as a Recovery Startup Business, companies that started operations after February 15, 2020 must have annualized gross receipts of less than $1 million. Many types of companies are eligible for up to $50,000 for quarter 3 in 2021, and $50,000 for quarter 4 in 2021 (up to $100,000 total). An employer can receive up to $7,000 per employee (provided the employee makes at least $10,000 or more during the eligible time period).
Many complex calculations are involved in receiving the ERC. Specialized knowledge is extremely helpful due to the ever-changing IRS guidance. Of course, businesses want to maximize the benefit of all government programs, including the ERC, PPP loan forgiveness, Restaurants Revitalization Program, COVID sick pay, COVID Family Leave pay, and R&D tax credits, and government grants and contracts. You are not allowed to double dip between different programs, so submitting correct documentation is essential.
Warning – Many firms charge 20% to 30% of the amount of the ERC refund in return for helping a business file the paperwork. They are taking advantage of the businesses most in need of the money. At Beach Cities Accounting, we generally charge less than 10%, customizing our pricing to fit the complexity of the business we are helping.
We love helping businesses who have been hurt by COVID take advantage of this program, and if you have a recovery start-up business as described above, the process is generally simple.
Have questions? Call me or email me. We host a free weekly Friday webinar to answer questions or you can schedule a one on one meeting with me. Helping clients receive the (ERC) has warmed my soul. I love helping clients gain a huge, unexpected windfall, especially after difficult years.
Phone: (424) 257-0253
Email for webinar info or other ERC enquiries: ERC@BeachCitiesAccounting.com
Kathy McQuiggan is a CPA and CEO of Beach Cities Accounting, a boutique accounting firm located in Manhattan Beach, CA. We specialize in working with law firms, ranging in size from starts-up to 20 attorneys. Kathy is an Advanced Certified QuickBooks ProAdvisor with Big 4 accounting experience and over 20 years of accounting and business consulting experience. We provide services to clients across the country. Kathy is a LeanLaw Accounting Pro.