Customers who received a Paycheck Protection Program (PPP) loan during the first wave of aid were previously unable to use the Employee Retention Credit (ERC). However, under current legislation, a company can apply for the ERC even if it has received PPP assistance and loan forgiveness, as long as the salary paid with the ERC has not been paid with PPP money. The PPP provides a company with a forgivable loan. If they meet the terms of the loan, which include spending the funds on payroll or rent, there is no need to repay the loan.
The Consolidated Appropriation Act (CAA) has helped alleviate, but it has also created complexity for taxpayers who received a loan from the Check Protection Program (PPP) and qualified for the employee retention credit (ERC). In addition to the PPP, companies have the opportunity to take advantage of employee retention credits. The ERC is a refundable tax credit that is available to employers who have experienced a decline in gross receipts due to COVID-19. The credit is equal to 50% of qualified wages paid up to $10,000 per employee. The credit is available for wages paid between March 13, 2020 and December 31, 2020.
The CAA has made it possible for companies to take advantage of both the PPP and ERC. Companies can use PPP funds to cover payroll costs and then use ERC funds to cover other expenses such as rent or utilities. Companies can also use ERC funds to cover payroll costs that are not covered by PPP funds. However, companies must be aware that there are certain restrictions when it comes to using both programs.
For example, companies cannot use ERC funds to cover wages that have already been paid with PPP funds. Additionally, companies cannot use ERC funds to cover wages that have already been forgiven under the PPP program. It is important for companies to understand how the PPP and ERC interact in order to maximize their benefits and ensure compliance with all applicable laws and regulations. Companies should consult with their tax advisors or other financial professionals in order to determine how best to take advantage of both programs.