Strategic Approaches for Startups to Leverage the ERTC

November 24, 2023
Dayes Law Firm

If you launched a business after February 15, 2020, you know the impact that COVID-19 has had on companies. You may have seen the pandemic as a limitation (if you had to temporarily close your restaurant due to a government mandate) or an opportunity (if you started offering take-out delivery services). In either case, your business could count as a recovery startup business and qualify for financial relief through the Employee Retention Tax Credit (ERTC) program. 

Whether you’ve already claimed your ERTC for startups or you’re just learning about it now, you may be thinking about how best to use the credit. Specifically, how can you leverage ERTC funds to grow your business? 

How Can the ERTC Help My Startup Grow?

Claiming your ERTC refund can help your business in a variety of ways, from helping you attract new talent to bolstering your bottom line.

1. Improve Financial Stability

The ERTC for startups can alleviate financial pressure, allowing you to think more about increasing revenue and less about accumulating debt. As a recovery startup business, you may qualify to claim a tax refund of up to $50,000 per quarter.

2. Increase Cash Flow

Startups that qualify for the ERTC can lower their payroll tax liability, and possibly even qualify for refundable credits in excess of payroll taxes paid. This can help you free up resources for new offerings and initiatives.

3. Retain Current Workers

A primary goal of the ERTC is to help you keep your workforce intact. ERTC funds may enable you to retain your current staff during busy periods and avoid layoffs during slow periods. In addition to allowing your business to move forward consistently, a stable workforce can help you avoid the costs of hiring and training new workers.

By showing a commitment to your employees, you may also end up boosting employee morale. Employees who feel valued and rewarded will pay you back in increased motivation, productivity, and loyalty. 

4. Attract New Employees

Growth can’t happen without a dedicated team of employees. In a tight labor market, however, you might find it challenging to find qualified workers. One option is to use your ERTC funds to create an attractive compensation and benefits package for new hires. 

How Do I Know If My Business Qualifies for the ERTC?

To qualify for startup ERTC benefits, businesses must meet a host of eligibility requirements, including the following:

Recovery Startup Criteria

  1. You started a new business or trade after February 15, 2020
  2. Your business had average annual gross receipts totaling no more than $1 million for the three-year period ending on December 31, 2020.

ERTC Eligibility Criteria

  1. Your business experienced a significant decline in gross receipts or full or partial shutdown due to COVID-19 government orders.
  2. You paid qualified wages to employees from March 12, 2020, to December 31, 2021.

While these are some of the primary criteria, other specific rules and regulations may apply. It is essential to accurately determine whether your business meets the eligibility requirements. If your organization incorrectly or fraudulently claims the ERTC, you may face financial penalties and interest charges.

Legal Help for Recovery Startups Claiming ERTC

The process of filing for ERTC for startups requires careful documentation, intricate calculations, and accurate paperwork. If you would like assistance during any part of the process, the Employee Retention Credit team at Dayes Law Firm can help.

We offer free consultations to recovery startups and other businesses looking to claim the tax credits for which they qualify. Call us today at (800) 503-2000 to speak with a knowledgeable ERTC lawyer.