Skip to main content

Site Navigation

Site Search

global Tax

What is the Employee Retention Credit for Recovery Startup Businesses?

May 22, 2023

Was your business founded after February 15, 2020? You are likely eligible for employee retention credits (ERC) if you have not yet benefited. We have the details here.

Were you adventurous enough to start a business while the world was experiencing a pandemic? If yes, have you explored applying for the Employee Retention Credit? Here’s what you should know if you’re a recovery start up business.

ERC Background info

The Employee Retention Credit was created under the CARES Act to provide financial relief to employers who kept workers on the payroll during the COVID-19 pandemic. Subsequent legislation expanded and extended the ERC through 2021.

There are 2 ways to qualify for the credit –

  • The 1st criteria – You experienced a full or partial suspension of operations during 2020 or 2021 because of government orders which resulted in a material impact on your business operations.
  • The 2nd criteria – You experienced at least a 50% decline in gross receipts in any calendar quarter in 2020 compared to the same quarter in 2019 (20% decline in gross receipts in any calendar quarter in 2021 (or Q4 2020) compared to the same quarter in 2019).

Maximum Credit

The credit is worth up to $5,000 (50% of the first $10,000 of qualified wages) per employee for 2020 and up to $7,000 (70% of the first $10,000 of qualified wages) per employee PER QUARTER in 2021.

What is a recovery startup business?

Different rules apply for recovery startup businesses. Under the American Rescue Plan Act (ARPA), recovery startup businesses include all employers that:

  • Began carrying on any trade or business after February 15, 2020.
  • Have average annual gross receipts under $1,000,000.

Maximum Credit for recovery startup business

Employers that meet the recovery startup business parameters (without suspended operations or reduced receipts), are eligible to claim Employee Retention Credits up to $50,000 total per quarter for the third and fourth quarters of 2021.

The rules for recovery start-up businesses are complex—we can help you navigate your individual situation. Contact us today.

Stay informed. Get all the latest news delivered straight to your inbox.

Also in Tax Blog

up arrow Scroll to Top