- Samantha Higgins
The Recovery Startup Business Tax Credit
Employee Retention Tax Credit
We’ve been talking with many of you over the past few weeks about ways you can extend your runway, and we wanted to bring one particular tax credit to your attention: the Recovery Startup provision of the Employee Retention Tax Credit.
If you (a) began operations after February 15, 2020, and (b) have average annual gross receipts of less than $1m, you’re eligible for this credit. The credit allows you to claim up to $50k per quarter, for each of Q3 and Q4 of 2021.
You can potentially claim up to $100k in credits, as follows: you’re able to claim 70% of the wages you pay a given employee, for the first $10k you pay an employee in a given quarter. If you have eight people on payroll, you can likely claim the full $100k, and on average we’re seeing folks claim something like ~$50k from this credit, so it’s definitely worth looking into.
How do I claim the credit?
Note that this is a payroll credit, not an income tax credit, meaning that your payroll provider, not Pilot, is best-suited to help you here. Gusto and Rippling are the most popular providers we work with, and we include their instructions below. For any other payroll provider, we recommend you get in touch with them directly.
Gusto will not assist with claiming this credit, so you have to turn to a third party.
Our recommended option is Accountalent. Accountalent will charge $500 per quarter to amend each quarter’s payroll tax return, for a total cost of $1000 if you’re eligible for both quarters.
Gusto also recommends Clarus, which will charge 10% of the claimed credit. (If you’re able to claim the full $100k, that would be a total cost of $10k.)
Rippling support should be able to help you claim this credit.
Payroll correction runs cost $20 per run, and amendments cost $350 per agency per quarter. Depending on your pay period, this will also come out to about ~$500 per quarter.
Any gotchas I need to be aware of?
You can’t use the same wages for both the R&D Credit and this credit, so make sure you’re not claiming the same wages for both. So just be sure to let (a) the tax firm doing your income tax return, and (b) the firm doing your R&D credit study know that you’ve done this.