The number of small business owners, nonprofits, schools, and Universities that have been told by a CPA, Tax Attorney or another well-meaning trusted advisor that because they received PPP they are not eligible for ERC is mind-blowing. THAT IS NOT TRUE
When the grants were first introduced, that was the case, but no longer. The truth is if you received PPP you are almost guaranteed to qualify for ERC.
If you are in this situation, the best move you can make is to talk with a credible ERC recovery specialist. The only ERC recovery firm we suggest is BottomLine Concepts. BottomLine is the top-rated ERC recovery firm in the United States. At the time of this writing, they have recovered over three billion dollars for over fifteen million organizations around the United States.
Their clients include companies like Hilton Hotels, Rolex, Uber, McDonalds, and four hundred of the top one thousand companies in the United States.
You can schedule a Discover Call with a BottomLine Pro by clicking here.
Under section 206(c) of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, an employer that is eligible for the employee retention credit (ERC) can claim the ERC even if the employer has received a Small Business Interruption Loan under the Paycheck Protection Program (PPP).
Employers can claim the ERC on qualified wages that are not counted as payroll costs in obtaining PPP loan forgiveness.
If you are not familiar with these programs for assisting businesses suffering a loss during the COVID-19 pandemic, then we highly recommend that you schedule a 10-minute discovery call with a Bottomline recovery specialist.
Yes, You Can Get Employee Retention Credit and PPP Loan, no matter what a trusted advisor has told you
Getting an ERC and PPP loan depends on certain conditions which are required to be fulfilled in order for businesses to be eligible for both. An organization that is qualified for the Employee Retention Credit might seek the ERC even if the firm has obtained a Small Business Disruption Credit via the Paycheck Protection Program, according to subsection 206(c) of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Any qualifying earnings that are not considered payroll expenditures in getting PPP debt forgiveness can be claimed by the eligible company. Any salaries that qualify for the ERC or PPP debt forgiveness program can be allocated to one of these two projects alone.
Can You Get Employee Retention Credit and PPP Loan in 2021? Of course
In 2021, the Consolidated Appropriations Act made it feasible for a PPP loan recipient to be eligible for ERC. When applying for each program, different wages must be utilized. Payroll expenditures reported on a PPP application for forgiveness in 2020 are not eligible for ERC, according to the IRS.
Yes, filing for the ERC program can be a very complex project and should be handled by a competent professional.
The Employee Retention Credit is available to employers who get PPP provided they meet one or more of several criteria:
The 3 most common are.
- A member of the controlled group is getting PPP, while another member of the group who is not receiving PPP has applied for ERC.
- The PPP loan doesn’t cover the qualifying salaries of the employer or head of the organization.
- Qualifying wages are obtained using profits from a forgiven PPP loan, but the forgiveness is not for the same earnings as the ERC qualifying wages.
Although you cannot get a PPP loan after 2021 as it is no longer available.
There are some differences between the PPP and the ERC. To assess eligibility and which program will benefit your business the best, a competent examination of each program separately and in comparison should be conducted by a credible professional.
Employee Retention Credit After Receiving Paycheck Protection Program
Several improvements to the ERC may bring significant assistance to your business. The following are noteworthy changes that have an impact on small businesses:
- Many are unaware that the ERC has been extended until June 30, 2021.
- Increased the credit percentage for eligible salaries from 50% to 70%.
- The per-employee qualifying wage ceiling was raised from $10,000 per year to $10,000 per quarter.
- Gross revenues are down from 50% to 20% year over year.
- Employers are now permitted to consider prior-quarter gross receipts to assess eligibility.
- Employers who get PPP loans may still be eligible for the ERC as of March 13, 2020, thanks to the new legislation.
As previously stated, the ERC program has gone through seven amendments and should be filed by a professional firm like Bottomline. We do not recommend that you outsource this project to your CPA. CPAs file taxes and ERC professionals prepare grants, and this is like comparing Apples and Oranges. As a matter of fact, about thirty percent of Bottomline referral partners are CPA’s from around the USA that outsource this service directly to BottomLine.
Clients who received a PPP loan during the first wave of relief were previously unable to use the ERC. However, under the current legislation, a company can apply for the ERC even if it has received PPP assistance and loan forgiveness, as long as the ERC salary was not paid with PPP money. As previously stated, this modification took effect on March 13, 2020, and many are not aware of this update.
PPP Loan Vs. Employee Retention Credit
The three main differences between the Payroll Protection Program (PPP) and Employee Retention Credits (ERC) are the type of funding when the business receives funding and the program’s cost.
A forgivable loan is provided by the PPP to a business. The loan does not need to be returned if they follow the terms of the loan, which include using the PPP cash for payroll or rent.
The ERC is a refundable tax credit. It is paid to the company by the IRS in the form of a check that does not need to be returned and can be used as the organization sees fit.
When a Company Gets Funding:
The money is deposited directly into the business’s bank account under the PPP. This usually occurs within a week of the loan being approved.
The ERC is a credit given to a company when it files its quarterly Form 941. When they process payroll, the credit is applied to the payroll taxes they collect from employees and transferred directly to their bank account.
Comparison of Costs:
A firm that applies for a PPP loan incurs no upfront costs. The only expense is if you do not repay the loan in full according to the terms.
ERC is free of charge. It’s a tax deduction that you claim while filing your quarterly tax return. The only cost is if you choose a service to file your tax returns for you. Many ERC recovery firms charge $5,000 to $10,000 to get the process started.
Another reason we recommend BottomLine Concepts is they provide their service on a contingency basis. The small business or organization will pay no upfront fees, and the agreed-upon contingency fee is paid AFTER the funds are transferred to the organization’s bank account.
Am I Eligible?
Yes, you could be eligible but there are certain requirements to be eligible to get both ERC credit and PPP loan. A PPP loan is available to all small firms with 500 or fewer employees, as well as select enterprises in specified sectors with more than 500 employees. Self-employed people, independent contractors, single proprietorships, nonprofits, veterans’ groups, tribal enterprises, housing cooperatives, private schools, news organizations, and rural farming cooperatives all fall under this category.
Employers of any size can be eligible for the Employee Retention Credit, provided they satisfy the requirements.
There are multiple ways to qualify for the ERC grant. The most common being you have experienced one of the following in either calendar quarter in 2020 to be eligible:
- Government directives connected to COVID-19 have entirely or partially halted or disruption of your business activities.
- Due to the coronavirus, gross revenues or income decreased significantly this will guarantee you qualify but IS NOT A REQUIREMENT.
Am I Eligible for PPP Loan?
No, the PPP loan is no longer available for businesses. Although here are some of the criteria that were required for businesses to qualify for a Paycheck Protection Program loan:
- On February 15, 2020, you were operational;
- You have a consistent income as a self-employed individual.
- You have a principal home in the United States; and
- You filed or will file a Form 1040 Schedule C for 2019.
Instead, general active partners’ self-employment income can be declared as a payroll expense on a PPP loan application made by or on behalf of the partnership, up to a hundred thousand yearly.
Under the Act, alliances are eligible for PPP loans, as well as the Administrator has determined, after consulting with the Treasury secretary, that trying to limit collaboration and its partners to one public-private partnership loan is necessary to ensure that as many loan applicants as possible receive PPP debts well before the statutes time limit of June 30, 2020.
How Do I Apply?
You can apply for the ERC by filling out the online application document and submitting it to an authorized lender to apply for ERC. Additional documentation, such as photocopies of your company’s employment tax forms and payroll ledgers, will be required at the time of applying for the loan. You can no longer apply for a PPP loan as it is no longer officially available for businesses.
A qualified expert from a credible ERC firm can walk you through the entire process.
The best way to apply for the ERC program is to schedule a 10 Minute Discovery Call with an ERC specialist. They can answer all your questions and explain the entire process.
Employee Retention Credit and PPP Loan Requirements
Employers who have acquired a reduction in gross revenues or have been forced to cease operations owing to government orders linked to COVID-19 are eligible for the Employee Retention Credit.
Despite the fact that both programs target the same issue of employee retention, there are a few critical characteristics that distinguish them. The PPP allows more freedom in terms of how enterprises might use loan revenues, which is perhaps the most noteworthy distinction.
To be eligible for the PPP, enterprises must have experienced a drop in gross receipts of more than 25% as compared to the same quarter the previous year.
To be eligible for the Employee Retention Credit, they must have suffered a fall in gross revenue of more than 50% when contrasted to the same quarter the previous year.
ERTC and PPP Strategy
Although both the PPP as well as the ERTC provide tax-free cash, there are certain tax variations between the two programs that you should be aware of before determining how to continue.
The following are the key tax differences between Paycheck Protection Program (PPP) loans and the Employee Retention Tax Credit (ERTC):
- On your year-end tax return, the costs paid using forgiven PPP monies are tax-deductible.
- At the end of the year, the ERTC salaries used to compute the ERTC credit are not tax-deductible.
- This implies that if you earn ERTC credits, you must cut your pay to compensate for the credits.
- Employers who are qualified for both PPP Loan cancellation and the Employee Retention Credit should strive to take advantage of the PPP Loan forgiveness first.
- ABC Company, for example, obtained a $100,000 PPP Loan. They have $40,000 in non-payroll expenditures and $60,000 in payroll charges that are eligible for PPP Loan cancellation.
- ABC is also qualified for the ERTC. They are unable to claim any additional payroll costs from the ERTC.
- They should choose the PPP Loan Forgiveness option over the ERTC in this instance.
ERTC and PPP Spreadsheet
You can use the worksheets your ERC recovery firm supplies you to verify that your documentation for seeking Employee Retention Credit and PPP is accurate and full. It’s critical that you only provide documentation that the Small Business Administration accepts (SBA).
Is There a Deadline?
It is important to remember that financing is limited and loans are given on a first-come, first-served basis. Eligible employers claimed the Employee Retention Credit on qualified wages received till December 31, 2021, which was the deadline.
PPP Loan Deadline
Depending on when you acquired your loan, the PPP loan deadline was September 2021.
Employee Retention Credit Deadline
This is what the Employee Retention Tax Credit is doing. The initial date for the ERTC retroactive period, January 1, 2022, was pushed back to October 1, 2021. There are also adjustments in qualifications. At the time of this writing, you have until April 2025 to file and receive your ERC grant.
Other FAQs Related to Employee Retention Credit and PPP Loan
Is the Employee Retention Credit Different from PPP Loan?
The PPP loan includes a five-year payback schedule and one percent fixed interest rate. The Employee Retention Credit is not refundable. If you obtain a credit advance (using Form 7200), you’ll need to account for it when completing your Federal Employment Tax Return.
Can You Get the Employee Retention Credit if You Got a PPP Loan?
Yes, even if you’ve taken out a Paycheck Protection Program (PPP) loan, you can collect the Employee Retention Credit. However, this wasn’t always the case. PPP loan beneficiaries were barred from applying for the ERC after the CARES Act was put into law in March of 2020.
How Does the Employee Retention Credit Work with PPP?
Any qualified earnings not recorded as payroll expenditures in securing PPP debt forgiveness can be claimed by the eligible company. Any salaries that qualify for federal loans under the ERC or PPP can be used for one of these two programs, but not both.
Please ignore the “Caution” section in the instructions for your employment tax return under the line instructions for “Non-Returnable Portion of Employee Retention Credit From Workbook 1,” as the information in that section is no longer accurate following the passage of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Conclusion on Can You Get Employee Retention Credit and PPP Loan?
Business owners who received a PPP loan were initially ineligible for the ERC. However, under a new relief package signed into law in December 2020, qualifying companies could claim the ERC even if they took out a PPP loan. This modification is retroactive, so it will apply to qualifying companies’ salaries after March 12, 2020.
It is possible to get employee retention credit and a PPP loan. However, it is important to understand these programs’ requirements and eligibility criteria. If you are interested in applying for either of these loans, be sure to consult with a financial advisor to learn more about your options. You can schedule a day and time that works for you for you 10 Minute Discovery call by clicking here.