Did you know you might be eligible for the ERC, even if you’ve received PPP?
That’s right, this tax credit could significantly ease your financial burden. Let’s debunk some myths, and clarify how you can leverage both to maximize support for your business.
By the end, you’ll understand your ERC eligibility and its benefits, even with a PPP loan under your belt.
You’re likely familiar with the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC), but understanding their intricacies can significantly impact your business’s financial relief efforts.
The PPP, a loan designed to maintain workforce employment, and the ERC, a refundable tax credit for struggling employers, are both critical tools in navigating the economic challenges of the pandemic.
An in-depth exploration of their structures, eligibility requirements, and benefits will equip you with the knowledge to maximize these resources effectively.
While you’re navigating the economic impact of the pandemic, it’s essential to understand that the Paycheck Protection Program (PPP) is a loan program designed by the CARES Act to help struggling businesses keep their workforce employed.
In the midst of navigating financial challenges brought on by the pandemic, it’s crucial to understand what the Employee Retention Credit (ERC) is and how it can work in conjunction with the Paycheck Protection Program (PPP) to help your business.
The ERC, introduced under the CARES Act, is a refundable payroll tax credit designed to incentivize businesses to keep employees on their payroll. If you’ve experienced partial shutdowns due to government orders or significant declines in gross receipts due to COVID-19, you may qualify.
With certain eligibility criteria met, you could claim as much as $5,000 per employee in 2020 and as much as $21,000 per employee in 2021. Thus, understanding and utilizing the ERC can significantly aid in your business’s financial recovery.
While both the PPP loan and ERC offer financial relief, understanding the key differences between them is essential for your business strategy.
From the type of funding and timing to cost and eligibility, each program has its unique aspects.
Let’s explore these differences to help you make an informed decision on which best suits your business’s needs.
Navigating through the financial challenges of the pandemic, you’ll find that the primary difference between the PPP and the ERC lies in the type of funding they provide.
Understanding these differences is crucial in making informed decisions for your business’s financial health during these challenging times.
When it comes to funding time, there’s a notable difference between the PPP and the ERC that you should be aware of. If you’ve qualified for a PPP loan, you generally receive the funds via direct deposit within ten days of approval.
However, the ERC works differently. The ERC isn’t distributed as swiftly as the PPP loan. Instead, it’s processed after you file Form 941-X and the IRS reviews your claim. The IRS then processes the credit you’re owed and sends you a check. This process could take anywhere from 3 to 6 months or more.
It’s advisable to file your paperwork with the IRS as soon as possible to secure your place in line.
Understanding the costs associated with the PPP and ERC can directly impact your business’s financial decisions. While there are no direct government fees attached to either of these programs, there are potential costs that you should consider.
You’ll notice key differences in the eligibility requirements for the PPP and ERC that could significantly impact your business’s relief options.
For the PPP, your business needs to have 500 or fewer employees and must have been operational before February 15, 2020. Additional requirements apply for second-draw loans.
Conversely, the ERC eligibility changed in 2021 and now includes businesses with up to 500 employees, a decrease in gross revenue of at least 20% compared to the same quarter in 2019, or a full or partial suspension of operations due to government mandates.
Navigating these requirements can be difficult, but understanding these differences is crucial for utilizing these relief options effectively and maximizing your business’s potential benefits.
To maximize the benefits of both the PPP and ERC, it’s crucial that you differentiate the total payroll costs used for each program. Doing this ensures that you can appropriately leverage both programs without facing disqualification for double-dipping.
Here are four key steps to maximize the PPP and ERC:
Despite your business’s PPP loan status, you’re not automatically disqualified from applying for the Employee Retention Credit (ERC). This shift in policy came about with the Consolidated Appropriations Act of 2021, which now allows businesses that have received PPP loans to also qualify for the ERC, provided they meet the eligibility requirements.
However, there’s an important caveat to remember: You can’t apply the same wages towards both programs. In other words, if you used certain wages to qualify for PPP loan forgiveness, those same wages can’t be used to calculate your ERC. This is to prevent “double-dipping,” or receiving benefits from both programs based on the same expenses.
Let’s illustrate this with an example. Suppose your business has payroll expenses of $25,000, and you used PPP funds to cover $15,000 of those expenses. If you obtained forgiveness for your PPP loan, you can only use the remaining $10,000 in payroll costs to calculate your ERC.
It’s time to debunk some common misconceptions about Employee Retention Credit (ERC) and Paycheck Protection Program (PPP) loans.
You might’ve heard that if you’ve applied for a PPP loan, you’re automatically ineligible for ERC, or that the process to apply for these credits is too burdensome to be worthwhile.
Let’s cut through the confusion and clarify the truths about these crucial financial aid programs.
You might’ve heard the myth that if you’ve applied for a PPP loan, you’re not eligible for the Employee Retention Credit (ERC).
But the truth is, even if you’ve applied for a PPP loan, you can still qualify for the ERC.
This common misconception often prevents businesses from accessing potential financial relief, so it’s crucial to understand the actual regulations.
Contrary to popular belief, applying for a PPP loan doesn’t disqualify you from also claiming the Employee Retention Credit.
You might’ve heard that applying for both the Employee Retention Credit (ERC) and Paycheck Protection Program (PPP) loans is unwise. However, the truth is that utilizing both these economic relief programs can have a positive impact on your business.
Let’s debunk this myth and explore how these programs can complement each other to maximize your financial relief.
Often, small business owners mistakenly believe that they shouldn’t apply for both the Employee Retention Credit (ERC) and Paycheck Protection Program (PPP) loans, but that’s not the case.
It’s a common misconception that your business won’t qualify for the Employee Retention Credit (ERC) if your gross receipts didn’t drop by 50%.
The truth is, even if your revenues didn’t fall by half, your business could still be eligible for the credit.
The ERC could be available to businesses that were affected by partial or full suspensions due to government-ordered shutdowns.
Despite the common misconception, even if your business didn’t see a 50% drop in gross receipts, you’re still potentially eligible for the Employee Retention Credit if you experienced partial or full operational suspensions due to government orders.
Did you have to limit customer seating due to social distancing rules?
Were staff numbers reduced to meet safety regulations?
Did cleaning protocols affect your operating hours?
Were you forced to pivot to take-out services?
Each scenario could make you eligible for ERC.
Contrary to the myth that the Employment Retention Credit (ERC) has ended and it’s too late to reap its benefits, you should know that the program is still active.
In fact, the Consolidated Appropriations Act extended the ERC through 2021.
This means you can still claim the credit for qualifying wages paid during specific quarters, even if you’ve already utilized PPP loans for payroll.
Don’t fall for the myth that the Employee Retention Credit (ERC) has ended and it’s too late for you to take advantage.
You may think applying for the Employment Retention Credit (ERC) seems like a daunting task, but that’s far from the truth. With the right guidance, the process can be straightforward and relatively easy.
Not only is it feasible, but the potential financial benefits for your business make it a worthwhile endeavor.
Despite commonly held misconceptions, filing for the Employee Retention Credit isn’t as daunting or time-consuming as you might think.
In conclusion, don’t let misconceptions deter you from exploring the potential benefits of both the PPP and ERC.
Even if you’ve already secured a PPP loan, the ERC could still provide substantial tax relief for your business.
By understanding the intricacies of these two programs, you can strategically maximize your financial support during these trying times.
Don’t miss out on the potential savings that could help your business weather the economic storm.
