The COVID-19 pandemic has profoundly affected businesses of all sizes, leading to financial losses and closures. To mitigate the economic impact of the pandemic, the US government created several relief programs, including the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC). While both programs seek to support businesses, it is essential to understand the interaction between them.
The Paycheck Protection Program & Employee Retention Credit
The PPP loan program funds small businesses to cover payroll and other expenses. The loan can be forgiven if the funds are used for eligible expenses like payroll, rent, and utilities. Conversely, the ERC is a tax credit incentivizing businesses to retain their employees during the pandemic. It provides a credit of up to $7,000 per employee per quarter for qualified wages.
One important thing to note is that businesses cannot receive the PPP loan and the ERC for the same wages. This means that if a company received a PPP loan, they are not eligible for the ERC for the salaries used to support the loan forgiveness. However, businesses can still claim the ERC for wages not used for the PPP loan.
To illustrate this, let’s consider an example. A small business received a PPP loan of $100,000 and used it to cover payroll and other expenses. They paid their employees $50,000 in qualified wages during the same period. In this instance, the business is ineligible for the ERC for the $50,000 in salaries used to support the PPP loan. However, they can still claim the ERC for any additional wages not used for the loan.
It is also important to note that the ERC can be claimed for wages paid after December 31, 2020, while the PPP loan forgiveness covers wages paid before that date. This indicates businesses can claim the ERC for wages paid in 2021, even if they received a PPP loan in 2020.
Recap
To recap, the interaction between the PPP and ERC can be complex, and businesses must understand how they can benefit from both programs. By working with their accountants and financial advisors, companies can ensure they make the most of the available relief programs and maximize their financial support during these challenging times.
How We Can Help
Do you have any questions or issues? Our support team is available to assist you with anything you need. We understand your challenges and are here to take care of the hard work, so you don’t have to worry about anything! Our team of professionals is dedicated to ensuring that your company receives the maximum ERC credit it’s eligible for. So, don’t hesitate to contact us to learn more about ERC credits and how we can provide you with our expert assistance.