The Recovery Startup Business Employee Retention Credit

Just like the Employee Retention Credit, you might think that the RSB - ERC is a complicated endeavor that really isn’t that helpful.  In fact, you may not even realize that such a program exists for you and your business that happened to start in 2020.

But the truth is that, just like the regular ERC, the Recovery Startup Business Employee Retention Credit (RSB-ERC) is very worthwhile and is definitely something that qualified businesses should not miss out on.  Here are some facts, as well as a few myths in need of dispelling.

MYTH 1:  If you weren’t in existence in 2019, you cannot qualify for the ERC.  

FACT: This is actually true!  Which is why the RSB-ERC was created.  

So, who actually qualifies for the RSB-ERC?

Option #1:  A business with employees who started operations after 2/15/2020.

Option #2:  A control group of companies who started a new trade or business after 2/15/20 and has employees at the control group level. The control group’s three year average gross receipts cannot exceed One Million per year.

What’s a control group?  It’s a group of companies that have 50% or more common ownership.  Basically, a group of companies effectively ‘controlled’ 50% or more by the same owner or group of owners.

MYTH 2:  The RSB-ERC was canceled as soon as the infrastructure bill was signed.  You missed it!

FACT:  Unlike the ERC, the RSB-ERC was NOT affected by the recent signing of legislation.

How much is the credit worth?

The RSB-ERC can be difficult to calculate once you get into all the disqualified wages and other exceptions. However, here are some big things to consider.

• If you own 50% or more of multiple businesses then all qualification tests must be done at the group level.

• When considering employee wages for credit calculations no owners, or owner family members, will qualify. Their wages cannot be a part of the credit calculation.

• Wages used for PPP funds cannot also be used for the RSB-ERC. This means to get the most out of each program, you will need to allocate wages between the two programs.

The calculation of the credit can be applied to the 3rd and 4th Quarter of 2021 only.

• For businesses: there is a credit of 70% of the first $10,000 of wages paid to each qualifying employee for each qualifying period.

• There is a maximum credit of $50,000 per QUARTER.

• For control groups: $50,000 maximum per quarter credit also applies to all companies within a control group, at the control group level.

Is the credit taxable?

Essentially, yes.  The credit reduces the expense of wages, which does increase taxable income at the bottom line.

How to apply.

Just like the ERC, the RSB-ERC is taken right on your quarterly payroll tax form 941.  Of course, since one of the qualifying time periods has passed (Q3 2021), it’s 99% likely that at least one of those forms have already been filed. But also just like the ERC, the good news is that these 941 forms can still be amended to take advantage of this credit!  

We highly recommend working closely with your payroll company or an accountant if you want to claim this credit, especially if you have already claimed forgiveness on a PPP loan utilizing wages from these qualifying periods.  Yes it might take a bit of help.  However, the RSB-ERC can be very beneficial for those who qualify.  

If you should find that your accountant or payroll company is not handling this credit, please reach out.  We will be more than happy to find you someone who is.