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Employee Retention Tax Credit Eligibility Category

Employee Retention Tax Credit Eligibility Category

Recovery Startup Businesses are eligible for the ERC for 3rd and 4th quarter 2021

The American Rescue Plan Act of 2021 passed by Congress in March of 2021 expanded the Employee Retention tax Credit by introducing a new eligible category of employer – The Recovery Startup Business.

A Recovery Startup Business is defined as a business that started operating after February 20, 2020 and has “average annualized receipts” of less than $1,000,000. Recovery Startup Businesses are automatically eligible for the Employee Retention Credit in the third and fourth quarters of 2021.

The American Rescue Plan Act did scrap the Employee Retention tax credit for the fourth quarter of 2021 for all other employers, but Recovery Startups can still take the credit in the fourth quarter. The only limitation is that the credit has a maximum of $50,000 per company per quarter for these new Recovery Startup Businesses.

Throughout the pandemic, the Federal Government has explored different ways to guide and stimulate the economy through some of the most trying times in history. With new and expanded tax credits, such as the Employee Retention Tax Credit, to direct stimulus payments to taxpayers, getting the economy and job market back to pre-pandemic levels has been a priority.

These credits have been extremely popular with employers and have been a boon to companies looking to recoup their losses from when they were shut down or limited by government order.

Claiming the credits, however, can be difficult and counterintuitive. EmployerIncentives can help you decide if these credits are right for your business. For a free, no-commitment consultation, please reach out to .