Congratulations on starting your business during such an unprecedented time! Although it may have been challenging, the good news is that your business still has a chance to qualify for stimulus funding from the government in the form of the Employee Retention Credit (ERC). As a Recovery Startup Business, you could be eligible to receive up to $100,000 in tax refunds from the IRS later this year. Keep reading to learn more about how your business can qualify for this credit and how to apply.
What is a Recovery Startup Business?
Starting a business is no mean feat. But starting one amid a pandemic? That takes a level of courage and resilience that’s quite rare these days. If you’re reading this and you started a business just prior to or during the pandemic, let us first say congratulations on achieving a big milestone during such a tumultuous time.
But while you may not have qualified for any stimulus funding from the government before, there is one credit you do qualify for now. It’s called the Employee Retention Credit (ERC), and it could see you earn up to $100,000 in the form of a tax refund from the IRS later this year.
To understand how it works, you first need to understand what a Recovery Startup Business is and what qualifies it for the ERC.
Defining Recovery Startup Business
A Recovery Startup Business for the purposes of the Employee Retention Credit is defined as a business that began operations on or after February 15, 2020, and has average annual gross receipts that do not exceed $1 million.
Qualification criteria for a Recovery Startup Business
To qualify as a Recovery Startup Business, you must have one or more employees (other than >50% owners and certain family members of theirs). You must not be eligible for ERC under the other requirements, i.e. a significant decline in gross receipts or subject to governmental imposed restrictions.
Note that if you purchased an existing business that was open on or before February 15, 2020, your business may or may not be a startup business depending on your specifics. It would, however, certainly qualify under the other ERC rules, including the restriction and reduction in revenue criteria.
Aside from these eligibility criteria, most owners, spouses, and other family members (parents, siblings, children, etc.) will not count as eligible employees.
To know if your business qualifies as a Recovery Startup Business, you need to find an accountant to help you make the calculations, or better yet, check out our free calculations offer.
The ERC is a golden opportunity for Recovery Startup Businesses to alleviate the stress and pressure of financial loss due to the pandemic. In our next section, we’ll take a closer look at how the ERC works and how it can benefit you as a business owner.
Employee Retention Credit
Now, let’s talk about the credit that could see you receive up to $100,000 in tax refunds from the IRS this year: the Employee Retention Credit (ERC). The ERC is designed to provide financial relief to businesses that have experienced reduced revenue or been forced to shut down due to the pandemic.
Overview of ERC:
The ERC was introduced alongside the CARES Act in 2020 and has since undergone several changes. Initially, the ERC was not available to businesses that received Paycheck Protection Program loans. However, the Consolidated Appropriations Act, 2021 (CAA) and the American Rescue Plan Act (ARPA) have expanded the ERC to now include those businesses.
ERC for Recovery Startup Business:
As we mentioned earlier, Recovery Startup Businesses (businesses that began operations on or after February 15, 2020) are eligible for the ERC. To qualify, a Recovery Startup Business must have gross receipts under $1 million for both 2020 and 2021 and have at least one employee who is not a >50% owner or certain family members.
That said, there are additional factors to consider depending on your specific circumstances. Attribution rules apply for businesses with multiple owners or common ownership. Further, if you purchased an existing business that was open on or before February 15, 2020, it may or may not be a startup business depending on your specifics.
But don’t let these rules deter you from applying, as qualifying businesses could receive up to $100,000 in tax refunds later this year.
So, if you’re a Recovery Startup Business and think you qualify for the ERC, find an accountant to help you make the calculations and apply for the credit.
With The Fitness CPA, gym and fitness businesses can get their ERC calculations for free until the end of 2021. Head over to our website to calculate your ERC and take advantage of this limited time offer.
How to apply for ERC as a Recovery Startup Business
So, you have determined that your small business qualifies for the Employee Retention Credit (ERC) as a Recovery Startup Business. Congratulations! Now what?
The next step is to find an experienced accountant to help you make the necessary calculations. The ERC can be quite complex, and it is essential to ensure that you maximize the credit amount for your unique situation.
Luckily, there is good news for gym and fitness businesses. The Fitness CPA is providing free calculations for all gym and fitness businesses until the end of 2021. Yes, you read that right – completely free!
Simply head over to their website and fill out the form to Calculate Your ERC For Free. After you receive the calculations, you are under no obligation to work with them to finalize the process. The Fitness CPA team simply wants to help as many fitness businesses as possible get back on their feet post-COVID.
Don’t worry if you aren’t in the fitness industry – there are plenty of experienced accountants who can assist with ERC calculations. It is crucial to work with someone who understands the nuances of the ERC legislation and can accurately calculate your credit amount.
The bottom line is that if you qualify as a Recovery Startup Business, you could earn up to $100,000 in tax refunds from the IRS later this year. Don’t miss out on this opportunity to receive much-needed financial support for your small business.
FAQs about ERC
As a Recovery Startup Business, you may have some questions about the Employee Retention Credit. Here are some FAQs to help you out:
Eligibility for ERC: To qualify for ERC, you must be a Recovery Startup Business with gross receipts under $1 million dollars for 2020 and 2021 each. You must also have 1 or more employees (other than >50% owners and certain family members of theirs).
How the ERC works: The ERC provides a tax credit of up to $100,000 per employee for wages paid between March 13, 2020, and December 31, 2021. This credit can be applied against payroll taxes or claimed as a refund.
Impact of ERC on taxes: The ERC can help offset taxes owed to the IRS. If you have already filed your taxes for 2020, you can file an amended return to claim the credit. If you have not yet filed your taxes for 2020, you can claim the credit on your tax return.
Bottom line, the ERC is a valuable benefit that could help your new business get back on its feet post-COVID. So don’t hesitate to reach out to an accountant to help you crunch the numbers and apply for the credit.
In conclusion, the Employee Retention Credit is a lifeline for Recovery Startup Businesses. Starting a business in 2020 or 2021 was a courageous move, and the IRS is offering tax refunds to eligible businesses to get back on their feet. With our help, your Recovery Startup Business could be eligible for up to $100,000 in tax refunds. So don’t hesitate, find an accountant, make the calculations, and get your ERC before the end of the year. Remember, at The Fitness CPA, we’re here to help you optimize your tax refund for free. Take advantage of this opportunity to get back in shape post-pandemic.