Ask your fellow entrepreneurs: 2020 may have been the worst time to start a business in history.
But even as COVID-19 plunged the U.S. economy into its quickest and deepest economic recession in modern U.S. history, many Americans found themselves laid off and starting businesses of their own. In the second half of the year, applications for new businesses surged to more than 4.3 million in 2020.
While the pandemic greatly impacted all businesses, startups, and smaller businesses bore the brunt of it. These organizations usually have fewer resources and are more vulnerable to losing customers and investors during turmoil.
Here’s what our customers had to say:
an estimated 9.4 million small businesses closed their doors In April 2020, 44% of them were small businesses.
43% of businesses had temporarily closed, and nearly all these closures were due to COVID-19.
the number of active business owners in the United States decreased by 3.3. million, or 22%.
So, if you’re a small business owner or operator who’s reading right now, congratulate yourself for hanging in there. And know that relief may be available to eligible businesses in the form of a tax refund for keeping employees on payroll during 2020 and 2021.
What is the ERC?
What is the ERC for new businesses? The Employee Retention Credit is a tax refund that helps eligible businesses receive a potentially significant refund per employee they kept on payroll during the pandemic.
The reason it exists? It was developed to encourage and support employers who retained existing employees throughout 2020 and the first three quarters of 2021 by offering a generous payroll tax refund through the IRS.
How does this apply to your new business? Luckily, if you started your business after February 15, 2020, you may be eligible for the Employee Retention Credit.
According to the IRS, a recovery startup business is “an employer that began carrying on a trade or business after February 15, 2020.” Your new business must not have had annual gross receipts in excess of $1 million for the individual 2020 and 2021 tax years, and you must have one or more W2 employees, not including owner-operators or family members.
How was your new business affected?
Not only did startup businesses face the usual COVID challenges, like government shutdowns, social distancing, and supply chain problems, but many also faced other difficulties, such as:
Reduced revenue: Many experienced losses in revenue, which became cash flow issues without good operating costs
Access to capital: The availability of funding dried up quickly, and external capital became hard to come by.
Lower demand: When everything was uncertain, Americans were willing to spend less on goods and services.
Hiring & retaining workers: When the in-person limitations increased, so did remote work opportunities.
Delayed exits: The inability to exit companies during a business downturn affects other investments.
Inflation: As we recover from the pandemic, costs of goods and services are higher than many planned for.
These issues, such as supply chain disruption and permit and inspection restrictions, impacted the timing of construction projects by days, weeks, or even months – and can play a major role in the calculation of the ERC.
Success stories from businesses in the construction industry
The service was excellent. Everyone we dealt with was so helpful, and they made a complicated process very easy.
Coastal Pipeline, Inc.
There is no fee from them until they get you a refund. All my emails and questions were returned promptly. Thanks for a smooth process!
Innovation Refunds helped us get the employee taxes we paid into IRS for 6 quarters back and got our company back on its feet strong!
James Renovation and Construction
We work for you, with no upfront fee
Our independent tax attorneys have extensive knowledge of ERC qualifications and IRS tax code to help eligible construction companies claim their refund.
How can startups use the ERC refund?
With the ERC, qualifying organizations could receive a refund to help cover rising training costs, offer competitive employment incentives, and expand services. But you can use the money nearly any way you like.
For new businesses, that might mean:
Tools & technology
Financial & accounting support
Research & development
ERC qualifications for ERC recovery startup businesses
If you opened a business after February 15, 2020, your business may still qualify as a “recovery startup business” for the Employee Retention Credit (ERC). There are a few distinct qualifications, though:
According to the IRS, “A recovery startup business can still claim the ERC for wages paid after June 30, 2021, and before January 1, 2022. Eligible employers may still claim the ERC for prior quarters by filing an applicable adjusted employment tax return within the deadline set forth in the corresponding form instructions.”
Under the American Rescue Plan Act, businesses launched after February 15, 2020, are eligible – if their annual gross receipts did not surpass $1 million for the individual in 2020 and 2021. The business must employ one or more W2 employees.
Qualifying them for government shutdown orders
Determining eligibility under limited commerce
Outlining COVID’s impact beyond reduced revenue
It’s easy to get started and see if you are eligible for the ERC
Our network of independent tax attorneys will work to verify your claim and help you determine eligibility for the ERC.
Plus, as a new business owner, we know your time is precious. That’s why our highly-trained team moves eligible business owners quickly through the intake process. Then, if you qualify, we’ll guide you step-by-step in claiming the refund.
Let’s determine eligibility today.
Frequently Asked Questions
*Innovation Refunds works with a team of independent tax professionals. We will share your information with these professionals to evaluate and process your claims. Innovation Refunds does not provide tax or legal advice. Terms & conditions apply.