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PSA – Employee Retention Tax Credit - Recovery Startup Businesses

Devon Smith
Devon Smith
Last updated: June 3, 2024
Venture south fallback

Attention anyone who started a business in the last two years! 

If you were fun enough to launch a new business during the pandemic, you may qualify for Employee Retention Tax Credit as an “Recovery Startup Business”. The first round of Employee Retention Tax Credits from early COVID times were for existing businesses hurt by the shutdowns that were part of the response to COVID. But they did not apply to recent startups. 

In 2021, though, the program expanded to new startups: if you started your own business after February 15, 2020, you might qualify for credits as a “Recovery Startup Business”. Here at VentureSouth, we recently had a company tangentially related to our portfolio that was incorporated and started operations in 2021. The company just applied for roughly $92,000 of credit – additional capital that, if it is approved and funded, can be used to grow the business. [Author note: that funding was ultimately received, and used to keep the company operating.] So, quick PSA: go check it out. 

Here’s some quick Q&A: 

What is a Recovery Startup Business? A company that began business after February 15, 2020, has gross receipts under $1M, and that isn’t eligible for the original ERTC program. 

Is this the one where you have to show negative impact from COVID? No. That was also ERTC, but the earlier version. The Recovery Startup Business doesn’t require you to show impact from COVID. 

How much credit can a Recovery Startup Business get? A maximum possible credit of $100,000. The credit is up to $7,000 per employee, per quarter, with a maximum of $50,000 per quarter, for each of 3Q 2021 and 4Q 2021. 

Credit against what? Actually you just receive the cash and can use it for anything you like. It isn’t a credit against future payroll taxes. 

Is it a loan? Do I have to pay it back? No and No. (It’s not EIDL or PPP.) 

What do I have to do to get this? File Form 941X (amended to Form 941 payroll tax forms) for each quarter. You’ll probably want to talk to your tax advisor or a specialist about this. We suggest Bauknight Pietras & Stormer in Columbia for all things tax; but you might also try Clarus RD who this company used. 

What else do I need to know? Ask your CPA or tax advisor! There are complications about related businesses and owner/employees, corporate structure, and the precise calculations. But they are not that difficult – and if your credit is $100,000 it should be worth the time! 

What if I started a new business line within an existing business? You can also qualify for the credit if you started a new trade, product, or service offering within an existing business. There are more rules to prove this; this article should help figure out if you can.