The Definition of a Recovery Startup Business in Light of the ERC

August 22, 2023
Dayes Law Firm

Some determined entrepreneurs managed to open new businesses even during the first months of the COVID-19 pandemic, which was a rough financial period across the board. Managing a startup business as the world recovered from some of the toughest economic effects of the pandemic was surely no easy feat, and the Employee Retention Tax Credit (ERTC/ERC) in fact has specific guidelines when it comes to applying for the credit as a “Recovery Startup Business.”

Definition of a Recovery Startup Business

The ERC was implemented to help business owners make it through the financial challenges that came with the height of the COVID-19 pandemic. Eligible companies that retained staff on payroll during specific quarters of 2020 and 2021 can still potentially receive ERC refunds in the thousands of dollars if they apply for the tax credit retroactively.

The tax credit was first available for wages paid from March 13, 2020, to December 31, 2020, and was later extended to July 1, 2021. The American Rescue Plan Act of 2021 (ARPA) then extended the coverage period again to incorporate wages paid between July 1, 2021, and December 31, 2021.

But the Infrastructure Investment and Jobs Act retroactively ended the Employee Retention Tax Credit as of September 30, 2021. However, Recovery Startup Businesses still have the potential to claim the ERC for wages paid after June 30, 2021, and before January 1, 2022.

So, what is a Recovery Startup Business exactly? A definition provided by the Legal Information Institute of Cornell Law School and linked to in IRS guidance says a business may qualify as a recovery startup business if it started after mid-February 2020 and if gross receipts don’t exceed $1 million. 

If you started a business after February 15, 2020, your business might fit within this definition if it follows that gross receipts guideline and has one or more employees that don’t include owner-operators or family members.

Recovery Startup Businesses and the ERC

Since there are different guidelines for applying for the Employee Retention Credit as a Recovery Startup Business, you’ll want to be sure your business truly does qualify to claim the credit and how many quarters your business is really allowed to consider when it comes to qualified wages included in your claim. 

The maximum amount of ERC for Recovery Startup Businesses is capped at $50,000 per quarter. Not every business can claim that much, of course, but if your business qualifies and you don’t attempt to apply for ERC funds, you could be leaving some serious money on the table.

If you’re uncertain about your eligibility to apply for the ERC or just want someone on your side to assist with the process, the tax professionals at Dayes Law Firm can help. We may be able to help you and your business apply for the Employee Retention Tax Credit the same way we have helped other businesses file for millions in ERC refunds so far. 

By giving us a call or filling out the form on this page at your earliest convenience, we can get you started on the process with a free, no-obligation evaluation of your Recovery Startup Business’s ERC needs. Our team and our partners are very experienced in dealing with these claims, and we would be more than happy to help you get the money you’re entitled to. 

Contact our firm to see how Dayes Law Firm can help your Recovery Startup Business with the ERC today!