How to Claim Employee Retention Credit (ERC) and PPP Loans
Can You Get Both PPP Loans and ERC?
In response to the COVID-19 pandemic’s harmful impact on business, the U.S. government rolled out financial aid programs to help businesses stay afloat. Among these, the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) have been major lifelines for countless businesses. So, can a company benefit from both PPP loans and the ERC? The answer is yes, and an experienced attorney, such as the team members at Biz Head Law who have helped 7,500+ ERC applicants, can offer the ERC assistance necessary to properly submit an ERC application.
What is the difference between PPP and ERC?
The PPP, a brainchild of the CARES Act and under the U.S. Small Business Administration’s (SBA) management, provided up to $10 million in loans to small businesses grappling with COVID-19-related financial woes. If used to cover qualifying expenses like rent, utilities, and payroll costs, the loan could be entirely forgiven .
On the flip side, the ERC, a refundable payroll tax credit, was available for qualified wages paid to employees in 2020 and 2021. If your business had to partially shut down due to government mandates or suffered considerable quarterly gross receipts declines due to COVID-19, you might be eligible for the ERC retroactively, even in 2023. If you meet specific eligibility requirements, you could potentially claim up to $5,000 per employee in 2020 and as much as $21,000 per employee for 2021 .
Distinguishing Between PPP and ERC
While PPP provides a forgivable loan, ERC offers a tax credit that doesn’t need to be repaid . Moreover, the time required to receive the funds varies between the two programs. After approval, the PPP loan typically lands in your account via direct deposit within ten days. In contrast, you’ll get the ERC after filing Form 941-X and once the IRS reviews your claim, a process that might stretch between 3-6 months .
Can You Access Both PPP Loans and ERC?
Initially, a business that secured a PPP loan couldn’t apply for the ERC also. However, the Consolidated Appropriations Act of 2021 flipped the script, allowing businesses with PPP loans to also apply for the ERC retroactively back to 2020. Importantly, you can’t apply the same wages used for PPP loan forgiveness to calculate your ERC amount. Essentially, you’ll need documents proving that you’re not “double dipping” by using both programs to cover identical wages .
Process of Applying for PPP and ERC
While the window for PPP loan applications has closed, you’re still eligible to apply for the ERC using Form 941-X. If you find the ERC application challenging, don’t hesitate to reach out to an attorney well-versed in such ERC application issues .
Maximizing PPP and ERC Benefits
There are numerous strategies to maximize the advantages of both the PPP and ERC:
When submitting your PPP loan forgiveness application, prove that at least 60% of the total loan went towards payroll to be eligible for complete forgiveness.
Ensure that the total payroll costs used for the PPP loan differ from the total payroll costs you record with the ERC. This will help avoid denial due to double counting of payroll costs.
If you’ve previously applied for PPP, there’s no harm in applying for the ERC. Doing so can offset the financial losses incurred during the pandemic and position your business for future success .
Require ERC Assistance?
Applying for ERC can be tricky, especially when you’re also managing the day-to-day operations of your business. Any mistake on your application can be costly and lead to delays or denied refunds. If you need ERC help, consider seeking advice from an ERC attorney with significant experience in this area. They can guide you throughout the ERC application process and offer insight on maximizing benefits from these programs.
Additionally, an ERC calculator can be a helpful tool in determining how much you could potentially claim. But, it’s vital to remember that these tools provide estimates only, and a consultation with a professional can offer the most accurate understanding of your eligibility.
If you need help making sure you apply for your employee retention credit properly, on time, and have the best chance of being approved, you can schedule a call with Biz Head Law here or call 239-376-3428.
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With the help of the tax attorneys at Biz Head Law, businesses can quickly determine if they are qualified for this powerful incentive. In just 10 minutes or less, they are also provided with an estimate, which can be up to $7,000 per quarter for each of the first three quarters of 2021 and up to $5,000 for 2020 for a total of $26,000 per full-time W2 employee under the CARES Act.
Calulate Your ERC Amount Now
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