Per the American Rescue Plan Act, a business that opened its doors during the pandemic can receive the credit. Your startup may be eligible if you meet the following criteria.
1. You started your business on or after February 15, 2020.
2. Your annual gross receipts don’t exceed $1 million for the individual 2020 and 2021 tax years.
3. You have one or more W2 employees, not including owner-operators or family members.
For example, if you launched a food delivery business on April 1, 2020 with three employees and earned $500,000 for the 2020 and 2021 tax years, then you’re considered a recovery startup business and a perfect candidate for the ERC.
Unfortunately, if you started your venture in the second quarter of 2021, you won’t be able to claim any credit for 2020 or for the first two quarters of 2021. But, if you meet certain revenue reduction or government restriction criteria, you might be able to claim the credit for earlier quarters.
