Recovery Startup Provision Extends ERTC to New Businesses
Qualifying Businesses Should Act Now
If you have started a business in the past year and a half, you may be able to utilize the Employee Retention Tax Credit (ERTC) under a little-known measure called the Recovery Startup Provision.
If your business qualifies, it is important to act now because you will be able to take the ERTC for only the third and fourth quarters of 2021.
Under the Recovery Startup Provision, enacted this year as part of the American Rescue Plan Act (ARPA), businesses founded after February 15, 2020, can qualify for the ERTC with certain limitations.
New businesses falling into this category:
- Must show they have or anticipate average annual gross receipts of less than $1 million
- Are limited to taking the ERTC only for the third and fourth quarters of 2021
- Are limited to a maximum of $50,000 per quarter in tax credits
The ERTC, originally created by the Families First Coronavirus Relief Act – the first COVID-19 economic relief measure enacted in March 2020 – allows qualifying employers to claim tax credits for wages paid to employees during the pandemic. To qualify, a business must show it experienced a decline in revenues during the pandemic or that it was subject to a government-mandated shutdown. The credits are taken against payroll taxes, so they can be taken in real time on quarterly Form 941 returns. Under the Recovery Startup Provision, new businesses are not required to show a decline in revenues or evidence of a mandated shutdown.
If your business qualifies for the Recovery Startup Provision, contact your Adams Brown advisor for guidance on how to claim this valuable tax credit.