The COVID-19 pandemic has had a significant impact on businesses, and many have struggled to stay afloat during these challenging times. To help businesses, the government has introduced several relief programs, including the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP). In this blog post, we’ll explore the differences between ERC and PPP and help you decide which is right for your business.

Eligibility Requirements 

The eligibility requirements for ERC and PPP are different. To be eligible for the ERC, businesses must have experienced a significant decline in gross receipts or were forced to partially or fully suspend operations due to COVID-19. Additionally, businesses must have paid qualified wages to employees during the relevant periods. In contrast, to be eligible for the PPP, businesses must have 500 or fewer employees and have experienced a significant revenue reduction.

Purpose 

The ERC and PPP have different purposes. The ERC is designed to help businesses keep employees on their payroll, even if they are not working, while the PPP is designed to help businesses cover their payroll costs and other expenses.

Loan vs. Credit 

The PPP is a loan program, while the ERC is a tax credit. The PPP loan can be forgiven if the business meets certain criteria, such as using the loan proceeds for eligible expenses. In contrast, the ERC is a credit that can be claimed on a business’s tax return.

Amount 

The amount of the PPP loan is based on the business’s payroll costs, while the amount of the ERC credit is based on the qualified wages paid during the relevant periods. The PPP loan amount can be up to 2.5 times the business’s average monthly payroll costs, while the ERC credit can be up to $7,000 per employee per quarter.

Interaction 

The ERC and PPP can interact, but the interaction can be complex. If a business receives a PPP loan, it may not be eligible for the ERC for the same wages paid with PPP loan proceeds. However, businesses that did not claim the ERC for 2020 may be eligible to claim the ERC for 2021.

Still Unsure? Contact an Expert

If you’re unsure which program is right for your business, GetMyBizRefund can help. Our team of experienced tax professionals can guide you through the process and help you make the best decision for your business. Contact us today to schedule a consultation and learn more about how we can help you.