We are providing ERC consulting help. I didn’t see your email message come in the usual way, however. Sorry!

I have just sent you an email privately though…

Great question. And a firm in situation you describe probably fails to pass the “not more than $1,000,000 in gross receipts.”

I think the $2,500,000 for ten months (basically) gets reset to $3,000,000 for the 2020 year. And then because you don’t have three years to average but only one, that sets your (basically) one year average to $3,000,000. That’s more than $1,000,000. Which means you fail to qualify.

The precise recipe for making this short year adjustment comes from Section 448(c)(3)(B), which says this:

(B)Short taxable years
Gross receipts for any taxable year of less than 12 months shall be annualized by multiplying the gross receipts for the short period by 12 and dividing the result by the number of months in the short period.

BTW, the other thing to check, though, is that you don’t have another trade or business which gets aggregated with the new business. Why? Well, if that business operated in 2018 and 2019 and shows modest gross receipts that might pull down your average to under $1M per year.

E.g., say in 2018 and 2019 you have a little Schedule C sole proprietor thing. Maybe sideline consulting. Annual revenues $10K a year. If that’s case, now your
“average three years of revenue” formula looks like this:

($10,000+$10,000+$2,5000,000)/3 years equals $840,000. And now you qualify.

Yes. Sorry. Fixed. Thank you.

I used the email form as suggested to ask about your firm looking over our books for the Employee retention credit. I haven’t heard back yet. Do you know if someone is working on contacting us?

Wouldn’t that be $70,000 of employee retention credits, due to the seventy percent rule?

I think you can start another business and have your aggregated businesses possibly qualify as a recovery startup business. But keep in mind something that Dan Chodan explained here, Owner Wages and the Employee Retention Credit… You don’t get the credit for owners nor or family employees.

BTW, this accounting treatment was fully spelled out by the IRS in a notice that they pulbished yesterday as or after I posted this blog post: IRS Notice 21-49.