ERC -- Business started 03/13/2020

[FrebergCPA]

We have a business which commenced operations in March 2020 literally as COVID-19 was getting going.
The owner purchased this business. Discovered that ERC claims have not been filed for 2020 or 2021 and looking to quickly put this together.
The business is in Illinois and considered an essential business.

I am a bit confused about two points in this case:

1. For the significant decline in gross receipts test, do they look to the revenue of the previous owner or the gross receipts during 2020 and 2021?
2. To me, it appears they would qualify as a recovery startup business but limited to ERC for quarter 3 and 4 in 2021.

Any clarification and guidance appreciated in the case of a business start up simultaneously to the start of COVID

[TaxGuyBill]

I'll avoid your actual question because I would need to review some of the ERC rules, but you need to give details about what "purchased this business" means.

Bought stock in a corporation? Bought assets and started his own sole proprietorship? Something else? Business had employees both before and after purchase? The more details you give, the more likely somebody can address your questions.

[FrebergCPA]

Bought assets from outside third party. Husband and wife owners who established and LLC. Employees both before and after purchase.

[BOB W]

Does the purchased business have the same FED ID as the sold business had?

[FrebergCPA]

No. Purchased business obtained a new EIN

[BOB W]

I'll let someone else follow-up but I don't think you have the right to amend 941s of another Fed ID.

It is not unusual for Asset purchase of business because new owner does not want to buy the liabilities of the previous owner. In this case the purchase would seem to block amending 941 once the ERC is filed. Besided, you may not have access to the required data needed to file.

[FrebergCPA]

Agree that one can not amend the 941's of the prior owner but looking if any way to file ERC for 2021 for the new EIN business.

[BOB W]

https://www.withum.com/resources/can-my-startup-business-receive-the-employer-retention-credit/

[FrebergCPA]

Excellent article. Thanks for sharing.
Brings up one other question.
It would appear that a 2020 start up would not be able to file for ERC for the 2020 quarters., but if the business met either the partial shutdown or reduction in gross receipts criteria, could they file for Qtrs 1 and 2 of 2021?