Can A Recovery Startup Business Claim Erc In 2020?
If you've started a business after February 15, 2020, you may be eligible for Employee Retention Credits (ERC) to assist with cash flow. This is known is IRS terms as a recovery startup business. However, it's crucial to understand the rules and topics:
- eligibility requirements for employee retention tax credit
- employee retention credit scams
- how do you claim employee retention credit
- Employee Retention Credit Penalties
- employee retention tax credit refunds
- IRS notices for ERC
- American Rescue Plan Act of 2021 for ERC
- Best ERC Filing Company
The IRS has warned of fraudulent practices involving ERC claims and has included them in their 'Dirty Dozen' tax fraud list. You can't claim ERC for wages paid in 2020; only those paid between June 30, 2021 and December 31, 2021 qualify. Be wary of providers promising easy government money or unrealistic amounts per employee - this could lead to penalties.
Claiming ERC isn't a straightforward process; it requires collaboration with a payroll provider and CPA firm. In this article, we'll delve into the eligibility criteria, potential pitfalls and benefits of claiming these tax credits under the American Rescue Plan Act of 2021. We'll also look at relevant IRS notices that impact your ability to claim these credits effectively.
Eligibility Requirements for Employee Retention Tax Credit
You've got to remember, though, your startup business needs to have been established after February 15th, 2020 and should have average gross receipts of $1 million or less for you to qualify for the ERC. The IRS is explicit about this in its guidelines. This is a crucial step to ascertain your eligibility before you proceed with claiming the employee retention tax credits (ERTCs).
If your startup meets these criteria, then it's considered a 'Recovery Startup Business' under the American Rescue Plan Act of 2021. This makes you eligible for ERTCs for wages paid after June 30, 2021, and before January 1, 2022.
Be wary too of fraudulent ERC providers promising easy government money or massive payouts per employee. Such promises are clear red flags and signs that they may be attempting to engage in tax fraud. It's essential to work with a reputable payroll provider and CPA firm when applying for these credits.
What's more? These credits could save your recovery startup up to $7,000 per employee each quarter - capped at $50,000 per quarter – which can significantly help with cash flow during these challenging times.
Employee Retention Credit Scams
Beware of shady service providers promising easy government cash, as the IRS has flagged these scams in their notorious Dirty Dozen tax fraud list. The Employee Retention Credit (ERC) program, though a legitimate relief option for eligible Recovery Startup Businesses, is not an effortless source of funding.
Unscrupulous actors may lure you with promises of $26,000 per employee or free money from the government. Remember that claiming ERC improperly could result in significant penalties and interest.
The qualification for ERC is not based on supply chain disruptions or COVID precautions alone but requires careful assessment under specific criteria set by the IRS. For instance, your business must have started after February 15th, 2020, and had average gross receipts of $1 million or less.
As a recovery startup owner, it's vital to work closely with a payroll company that specializes in this specific tax credit to ensure accurate claim submissions. Don't fall prey to scam artists exploiting this tax credit opportunity. Always seek professional advice before proceeding with any tax-related matters to safeguard your business interests against fraudulent practices.
We are a partner with ERC Specialists. This company focuses solely on ERC claims and employs former IRS and seasoned accountants to ensure that your claim is compliant, above board, and audit-proof. We process the initial LINQQS qualification form and then this is sent on to ERC Specialists for quick and accurate processing. Read our review of the ERC Specialists here. To get started right away click the button below.
How Do You Claim Employee Retention Credit?
Navigating the maze of tax credits can be a daunting task, but with the right guidance and perseverance, it's possible to unlock substantial savings for your newly-established company. The Employee Retention Credit (ERC) is one such opportunity that might be available to you as a recovery startup business.
When it comes to claiming ERC, here are some steps you need to follow:
- Engage the services of a CPA firm well-versed in ERC guidelines as referenced above.
- Coordinate with your payroll provider for wage information.
- Identify eligible employees and calculate potential credits.
- Ensure compliance with IRS Notices 2021-20, 2021-23, and 2021-49.
- Submit required documents accurately and timely.
These steps should help streamline the process of claiming ERC. Remember that each case is unique and tailored advice from an experienced tax professional will ensure maximum benefit while maintaining compliance.
But keep in mind: Recovery startups can only claim ERC for wages paid after June 30, 2021, not before. Hence, if your business was established in 2020 but didn't start paying wages until mid-2021 or later - then yes, you may qualify. Don't miss this chance to secure needed cash flow during these challenging times!
Employee Retention Credit Penalties
Don't be fooled into thinking it's all smooth sailing when it comes to tax credits, as there are potential penalties lurking if you're not careful. The IRS takes tax fraud seriously and has included the Employee Retention Credits (ERC) in their Dirty Dozen list of tax scams.
If you improperly claim ERC for your recovery startup business, you could find yourself facing penalties and interest. This is especially true if you fall prey to fraudulent providers promising easy government money or guarantees of significant per-employee payouts. Remember: qualifying for the ERC isn't about supply chain disruptions or COVID precautions; it's about meeting specific criteria outlined by the American Rescue Plan Act of 2021 and subsequent IRS Notices.
Work closely with your Certified Public Accountant (CPA) firm and payroll provider throughout this process to ensure compliance with all regulations and guidelines. Mistakes can be costly, both in terms of potential financial repercussions and the integrity of your startup business. So tread carefully, stay informed, and don't let the promise of 'free money' cloud your judgment or rush your decision-making process on claiming these valuable tax credits.
Employee Retention Tax Credit Refunds
While it's crucial to avoid the pitfalls and potential penalties, let's not lose sight of the significant benefits you could reap from these employee retention tax credits.
As a recovery startup, you're eligible to claim ERC for wages paid after June 30, 2021, and before January 1, 2022. This can provide substantial relief to your cash flow challenges.
The American Rescue Plan Act of 2021 provides up to $7,000 per employee in tax credits per quarter – that's up to $28,000 annually! And remember this is capped at $50,000 per quarter. These aren't trivial amounts; they can indeed give your burgeoning business a much-needed financial cushion.
However, claiming these benefits isn't as simple as ticking a box on your tax return. You need to work with your payroll provider and CPA firm through the process. It may require some effort on your part but consider it an investment towards securing your business' future.
So don't shy away from utilizing these valuable tax incentives provided by the government. After all, every dollar saved is a dollar earned for your recovery startup business.
IRS Notices for ERC
You'll find that understanding the latest IRS notices can be a real game-changer when it comes to your tax strategy. Familiarizing yourself with these guidelines will provide clarity on how to navigate the complex landscape of employee retention credits (ERCs).
Important information about ERCs for recovery startup businesses is found in IRS Notice 2021-20, which relates to the year 2020. However, it's vital to comprehend that businesses formed after February 15th, 2020, are only eligible to claim ERC for wages paid after June 30th, 2021.
IRS Notice 2021-23 covers specifics for quarters ending March and June in 2021 while Notice 2021-49 addresses quarters ending September and December in the same year. It's worth noting that the Infrastructure Investment and Jobs Act eliminated the quarter ending December 31st, but this doesn't apply to Recovery Startup Businesses.
Remember, as a recovery startup business owner, knowledge is power. By staying updated with these IRS notices and changes within legislation related to employee retention credits, you're positioning your company for financial success by fully capitalizing on available tax benefits.
American Rescue Plan Act of 2021 for ERC
It's crucial to understand how recent legislation impacts your eligibility for Employee Retention Credits and the potential financial benefits they offer.
The American Rescue Plan Act of 2021 expanded ERCs to include recovery startup businesses, providing a lifeline to new companies struggling with cash flow due to the pandemic. However, this provision only applies to wages paid after June 30, 2021, and before January 1, 2022.
If your business was started after February 15th, 2020 and had average gross receipts of $1 million or less in that time frame, you're eligible. This means if your startup operated in 2020 but did not meet these criteria or pay wages within the specified timeframe, unfortunately, you cannot claim ERC for that year.
The Infrastructure Investment and Jobs Act also made changes that could impact your claim. It eliminated the quarter ending December 31st from consideration for ERCs. Yet as a recovery startup business, this exclusion does not apply to you.
Navigating these legislative nuances can be complex. Consult with a CPA firm familiar with ERC rules; they can help ensure you maximize your benefits while maintaining compliance.
Best ERC Filing Company - ERC Specialists
As previously discussed, the ERC claim filing process is quite complex and is largely the reason most CPAs advise businesses to choose the PPP loan plan alternatively. ERC Specialists provide a focused and dedicated service for processing ERC claims exclusively. Most business CPAs reach out to ERC Specialists for their Employee Retention Tax Credit claim needs. Click the button below to access the secure LINQQs portal to qualify and get your claim started before this plan expires.
Conclusion
Don't be swayed by fraudulent offers promising easy ERC claims for 2020. As a recovery startup, you're only eligible to claim these credits for wages paid between June 30, 2021 and December 31, 2021. Any improper claims can lead to penalties. Consult with your payroll provider and CPA firm to navigate the claiming process correctly.
Remember, being vigilant can save you from potential tax frauds and ensure you reap the full benefits of this tax credit program. To start your claim today by filling out the short LINQQ’s qualification form, click the button below.
Frequently Asked Questions
What is the Employee Rentention Credit (ERC)?
The Coronavirus Aid, Relief, and Economic Security Ac, signed into law on March 27, 2020, included two programs to assist businesses with keeping workers employe: Employee Retention Tax Credit (ERTC) administered by the Internal Revenue Service and the Payroll Protection Program (PPP) administered by the Small Business Administration.
How is ERTC different from the Payroll Protection Program(PPP)?
PPP funds are not taxable as revenue and you may still take deductions for the payroll covered by PPP. The funds from the PPP are distributed based on 2.5 months of payroll and a minimum of 80% of the funds must be used on payroll to be eligible for forgiveness.
ERTC tax credits, however, are credits (or refunds) for a percentage of payroll in each quarter that you qualify. There are specific rules for determining eligibility by quarter, and limiting the dollars that can be claimed for each employee.
If I Received Funds from the PPP, Do I Still Qualify for the ERTC?
The short answer is “Yes”. You can claim ERTC even if you received PPP funds. In March of 2021, The American Rescue Plan Act of 2021 created expansions and modifications to existing criteria of Employee Retention Tax Credit.
Businesses that received PPP funds could now also claim ERTC tax credits. ERTC credits can be retroactively claimed for businesses that qualified in 2020. The ERTC qualification period was extended through 9/30/21 with lower eligibility requirements.
The refundable credit amount increased from 50% of qualifying wages in 2020 to 70% in 2021. The per-employee cap on qualifying wages was increased from $10,000 for all of 2020 to $10,000 per quarter for the first 3 quarters of 2021.
How Do I Apply for the Employee Retention Tax Credit and My CPA Do This?
Unlike the Payroll Protection Program, there is technically no application process for the Employee Retention Tax Credits. You would simply claim the ERC tax credit like any other tax credit by asserting to the IRS that you can legally claim the credit.
Whether your tax accountant is a CPA or EA, they most likely only prepare Federal and State Income Tax Returns. However, ERC credits are claimed against Employment Taxes on Form 941, and cash advanced through Form 7200.
The ERC program is quite complex, which one of the main reasons most CPA's do not mention or attempt the claim process. It is also the reason most businesses pursued the PPP loan instead.
For prior quarters, you must file an amended form (the Form 941-X) to reduce your current quarter’s tax contribution. Also, you must request a refund of excess credits.
ERC Specialists focus only in this specific tax credit in order to maximize refunds, ensure accuracy, bulletproof your claim and save time. ERC Specialists provide audit protection and peace of mind.
Click the button below to start your claim