Employee Retention Credit and PPP

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.

Overview of ERC and PPP

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.

What Is the Paycheck Protection Program?

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.

  1. The PPP was established by the U.S. Small Business Administration. It provides loans up to $10 million to small businesses facing financial hardships due to COVID-19.
  2. You can receive a loan up to 2.5 times your average monthly payroll costs. This relief helps you maintain your workforce during this challenging time.
  3. The loan can be completely forgiven. If you use it for eligible expenses like payroll costs, rent, and utilities, and file a forgiveness application, you won’t need to repay it.
  4. It complements the Employee Retention Credit (ERC). The ERC is a refundable tax credit that encourages businesses to keep their employees on payroll. You can apply for both PPP and ERC, maximizing your economic relief.

What is the Employee Retention Credit?

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.

Differences Between PPP and ERC

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.

Type of Funding

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.

  1. The Paycheck Protection Program (PPP) provides a forgivable loan. If you properly allocate funds towards payroll, rent, and other qualifying expenses, it’s essentially a gift.
  2. However, if you misuse PPP funds, you’re obligated to repay them with a 1% interest rate over two or five years.
  3. In contrast, the Employee Retention Credit (ERC) is a tax credit that doesn’t need to be repaid.
  4. This means you can use the ERC to offset specific employment taxes, providing immediate cash flow relief.

Understanding these differences is crucial in making informed decisions for your business’s financial health during these challenging times.

Funding Time

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.

  1. Applying for the PPP loan is free, but remember that any loan amount not used on qualifying expenses will need to be repaid.
  2. Although the ERC is a tax credit gained by filing an amended payroll tax form, the process can be time-consuming and complicated.
  3. If you hire a tax professional to assist with the ERC process, their service charge will be an additional cost.
  4. Lastly, balancing the use of both PPP and ERC requires careful planning to avoid overlapping claims, which could lead to penalties.


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.

How to Maximize the PPP and ERC

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:

  1. Strategize your PPP Forgiveness Application: Ensure that non-payroll costs are included in your PPP loan forgiveness application, demonstrating that at least 60% of the total loan was used on payroll. This will allow you to qualify for full forgiveness.
  2. Provide Detailed Explanations: Clearly articulate how government orders impacted your business operations and financial health. This will assist your tax professional in effectively determining the maximum ERC you qualify for.
  3. Separate Payroll Costs: Ensure the total payroll costs used for the PPP loan are distinct from those used for the ERC. This prevents disqualification for using the same payroll costs for both programs.
  4. Engage a Tax Professional: Utilize the expertise of a tax professional. Although this may involve an upfront cost, their in-depth knowledge of the programs can help you qualify for more relief than you might secure independently.


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.

5 Myths About Employee Retention Credit and PPP Loans

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.

Myth #1: If You Applied for a PPP Loan, You Aren’t Eligible for ERC

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.

Truth: You Can Still Qualify for an ERC Even If You Applied for a PPP Loan

Contrary to popular belief, applying for a PPP loan doesn’t disqualify you from also claiming the Employee Retention Credit.

  1. The law permits simultaneous ERC and PPP applications.
  2. Businesses that received PPP loans can still claim the ERC.
  3. ERC can provide up to $7,000 per employee in 2021.
  4. You can claim the ERC on wages not covered by PPP loan forgiveness.

Myth #2: You Shouldn’t Apply for Both Employee Retention Credit and PPP loans

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.

Truth: Utilizing Both Economic Relief Programs Could Positively Impact Your Business

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.

  1. You can claim both ERC and PPP, providing extra relief.
  2. The ERC can be used flexibly, easing PPP payroll pressure.
  3. You can positively impact your business by availing both programs.
  4. We at Stenson Tamaddon assist you in maximizing these benefits.

Myth #3: If Your Business’ Gross Receipts Didn’t Drop 50%, You Won’t Qualify

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.

Truth: The Tax Credit Could Also Be Available to Businesses Affected by Partial or Full Suspensions

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.

Myth #4: The Employment Retention Credit Ended. It’s Too Late to Take Advantage

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.

Truth: The Employment Retention Credit is Still Available

Don’t fall for the myth that the Employee Retention Credit (ERC) has ended and it’s too late for you to take advantage.

  1. The ERC is still available for wages paid during 2020 and 2021.
  2. You have three years from your original tax filing deadline to claim it.
  3. The credit is for businesses affected by COVID-19 regulations.
  4. Don’t hesitate, claim your ERC today if eligible.

Myth #5: Filing for the Employment Retention Credit Will Be Too Much of a Hassle

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.

Truth: Filing for the Credit Can be Easy

Despite commonly held misconceptions, filing for the Employee Retention Credit isn’t as daunting or time-consuming as you might think.

  1. Stenson Tamaddon can assess your eligibility swiftly.
  2. Our proprietary technology ensures compliance, minimizing risks.
  3. We guide you through the Form 941X based on your quarterly federal tax return.
  4. We can even file for an advance payment on your credit, optimizing your financial relief.


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.