Employee Retention Tax Credit for Start-ups and Other Challenging Circumstances

by Ashwini Vasudeva

As tough as the pandemic was for all, no one can deny that for those who launched a new business during the pandemic, working through the COVID-19 pandemic aftermath has been a herculean task.

The American Rescue Plan acknowledges that starting a company at the onset or during the pandemic was extremely challenging and provides these companies an opportunity to hire and retain their employees. For the purpose of availing the Employee Retention Tax Credit (ERTC), companies founded after February 15, 2020, are called “Recovery Start-up Businesses.”

ERTC of $7,000 per employee can be claimed if a business pays at least $10,000 or more to the employee in the eligible time periods, provided they satisfy the following conditions:

  • The organization began carrying on a trade or business after February 15, 2020
  • The average annual gross receipts for the three-tax-year period ending with the tax year that precedes the calendar quarter for which the ERTC is determined do not exceed $1,000,000
  • The business is not otherwise eligible for the ERTC due to suspended operations or a gross receipts decline

As a Recovery Start-up Business, they are eligible to receive up to a maximum of $50,000 of ERTC per quarter in the third and fourth quarters of 2021.

As a new business with unique challenges, it is imperative to maximize the benefit extended for ERTC, however, you need expert advice and an in-depth analysis of your situation to do this correctly.

ERTC for far-reaching adversities inflicted by the pandemic

Apart from start-ups, there could be additional unique situations that may raise questions on ERTC eligibility.

One such circumstance could include businesses that experience far-reaching impacts of COVID-19, despite no major decline in revenue.

Simply put, circumstances might be present in which a business’ revenue has not declined as outlined within the provisions of the CARES Act, but other aspects of the business have been deeply impacted, such as:

  • Disruptions in the Supply chain due to COVID-19 restrictions
  • Time spent cleaning and sanitizing or the need to wear PPE
  • Shifting hours of operation to increase facility sanitation
  • Delayed or canceled projects due to COVID-related disruptions
  • Limitations on the number of people allowed in a room or building
  • Inability to attend normal networking events
  • Disruptions to your sales force’s ability to function normally
  • Reduction of the services or goods offered to customers
  • Reduction in hours of operation

These and similar factors have been detrimental to businesses during and after the pandemic and play a major role in determining your business’s eligibility for the ERTC.

With the multitude of possibilities and the finer points that make your business eligible, claiming this credit is complex and confusing.

To avoid errors in your ERTC application that could prevent you from receiving this tax credit, it is best to consult with an expert to help you through the process.

Time is limited to avail the ERTC. Reach out to Astute today to determine your eligibility and apply correctly. Thank you for retaining your employees through the pandemic.

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