How To Qualify as a Recovery Startup Business for the ERC

June 28, 2023
Dayes Law Firm

By now, you’ve likely seen ads or heard news about the Employee Retention Credit (ERC), a fully refundable payroll tax credit many business owners can claim on quarterly employment taxes from 2020 and 2021, during the worst of the COVID-19 pandemic. But there are specific guidelines when it comes to applying as something called a “recovery startup business.” To qualify as a recovery startup business for the ERC, there is a specific set of criteria a business has to meet. 

ERC Guidelines and Eligibility Periods

The Employee Retention Credit was created to help business owners make it through the financial hardships that came with the height of the COVID-19 pandemic. It encouraged eligible companies to retain W2 employees on their payroll, and businesses that met the guidelines could possibly receive a refund of thousands of dollars for each employee they kept on staff. 

In general, the ERC is available to eligible employers for wages paid from March 13, 2020, through December 31, 2021. But things get a little complicated after that date.

The tax credit was initially available for wages paid from March 13, 2020, to December 31, 2020, but was later extended. The Consolidated Appropriations Act, 2021 (CAA) later expanded the ERC to include wages paid before July 1, 2021, and The American Rescue Plan Act of 2021 (ARPA) also extended the coverage period to incorporate wages paid between July 1, 2021, and December 31, 2021.

However, the Infrastructure Investment and Jobs Act retroactively ended the Employee Retention Tax Credit as of September 30, 2021 – with one very important exception. Recovery Startup Businesses are still eligible through December 2021.

What is a Recovery Startup Business?

A business may count as a recovery startup business, defined by an explanation provided by the Legal Information Institute of Cornell Law School and cited by the IRS, if it started after mid-February 2020 and if its gross receipts don’t exceed $1 million.

If your business has one or more employees that do not include owner-operators or family members, your business might qualify as a Recovery Startup Business.

Your business may also qualify as a Recovery Startup Business if you purchased an already existing business that was in operation on or before February 15, 2020. Getting a trusted tax professional involved to work out details like these may be your best bet if you’re unsure of your business’s exact status. 

The bottom line is that most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021, according to the IRS. But Recovery Startup Businesses are special! They can likely still claim the ERC for wages paid after June 30, 2021, and before January 1, 2022.

ERC Team at Dayes Law Firm 

Determining whether or not your business is a Recovery Startup Business and thus eligible for the Employee Retention Credit depends on the circumstances of you and your business. The tax lawyers at Dayes Law Firm can help you establish your overall eligibility and work out whether your business is a Recovery Startup Business or not. 

The team at Dayes Law Firm and its partners have already been involved in filing for more than $250 million in ERC refunds for many companies, and we may be able to help you and your business, too. 

Please give us a call or fill out the form on this page as soon as possible to see how we can help you, including by discussing your overall case in a free, no-obligation consultation. We don’t want you and your business to miss out on this important program, so we’re happy to discuss your situation to see how we can best move forward together!

Contact us today to see how Dayes Law Firm can help you with the ERC, and why so many other businesses have already come to us for Employee Retention Tax Credit assistance