You likely already know that the employee retention credit (ERC) is a good deal—if you qualify.
Now, thanks to the recently enacted American Rescue Plan Act of 2021 (ARPA), you can qualify for up to $100,000 of ERC in the third and fourth quarters of 2021 if you
- begin the business after February 15, 2020 (you could start today),
- have average annual gross receipts of $1 million or less, and
- do not meet either of the ERC tests—the suspended operations test or the gross receipts test—in place before ARPA was passed.
When you meet the three requirements above, you qualify as a recovery start-up business and, as such, can claim an ERC of up to $50,000 in both the third and fourth quarters of 2021.
It works like this: your recovery start-up business ERC is equal to 70 percent of the qualified wages paid to each employee (up to $10,000 per employee per quarter), with an overall maximum credit of $50,000 per quarter.
The big deal with the two quarters of 2021 is that your business has to be new, but it does not have to suffer from COVID-19 stresses. In fact, it can’t qualify for the recovery start-up business special deal if it otherwise qualifies under the suspended operations test or the gross receipts test.