Businesses starting after February 15, 2020:
A business not in existence until after February 15, 2020 is considered a Recovery Startup Business (RSB) and may be permitted to claim the ERC for Q3 and Q4 of 2021; however, the new business is subject to a maximum credit of $50,000 per quarter and must have annual receipts of less than $1 million. Note – all rules discussed below apply.
Items to Note:
Wages paid to related parties: Wages paid to an employee who is considered a “related individual” are NOT considered qualified wages for purposed of the ERC. A “related individual” is someone who has the following relationship to an owner of 50% or greater:
A child or a descendant of a child;
A brother, sister, stepbrother, or stepsister;
The father or mother, or an ancestor of either; A stepfather or stepmother;
A niece or nephew; an aunt or uncle;
A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
An individual who has the same principal place of abode and is a member of their household
Common ownership of businesses: Entities that have common ownership may be treated as a single employer for purposes of applying and determining eligibility of the ERC. The common ownership rules are complex and we will analyze this for you during our initial steps of the ERC calculation.
Shut down by government order: There are specific rules which outline what is considered “fully” or “partially” shut down for purposes of the ERC.
PPP Loans and ERC: We will compare your business’s qualified period(s) for the ERC with your PPP loan covered period to determine if the credit is worth pursuing under your specific circumstances.
Timing for claiming ERC: Credit can be claimed on Form 941-X within three years of the date the original Form 941 was filed or two years from the date you paid the tax reported on Form 941, whichever is later.
This calculation is complex. Please reach out to us for assistance if you think your business qualifies for this credit based upon the information identified above. So that we can appropriately provide you with an estimate of time and cost for us to prepare the calculation, we will request initial information from you. Upon our review of the preliminary document requests, we will correspond with you to consider the cost/benefit of the professional fees in consideration of an estimate of the credit you could receive. Every situation is different.
As always, please reach out if you have any questions on the Employer Retention Credit or if you need assistance identifying if your business is eligible for this credit for the years 2020 or 2021.