Thinking About Starting a New Business? You Can Get Up to $100,000 in Tax-Free Money!
If you were thinking about starting your own business, today might be the best time to start! You might have heard about the employee retention credit (ERC) in the news. If you haven’t, the ERC is a refundable tax credit against certain employment taxes, equal to 50% of qualified wages an eligible employer pays to employees.
That is a surprisingly good deal there, assuming you qualify. The recently passed American Rescue Plan Act (ARPA) of 2021 has included recovery startup businesses as “eligible employers.” To qualify under this category, you must have:
Started your business after February 15, 2020 (you could start today!)
Averaged annual gross receipts of $1 million or less
Not met either of the ERC tests (suspended operations or gross receipts test) in place before ARPA was passed
When you do meet the three requirements, you qualify as a recovery start-up business and can claim an ERC of up to $50,000 each in the third and fourth quarters of 2021. The credit is equal to 70% 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. For example, if you paid $100,000 in qualifying wages for 2021 Q3 and Q4 (assuming no more than $10,000 per employee), the ERC will be $70,000 for each quarter.
ARPA has created huge incentives for starting a new business! While your business must be new to qualify for this credit, it does not have to suffer from COVID-19.
If you need help or have any questions, please do not hesitate to call us at (832) 295-3353. You can also set up an appointment with us at https://xqcpa-bookme.acuityscheduling.com/schedule.php.