The Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) were both created in response to the COVID-19 pandemic. Both programs were designed to help businesses stay afloat during the economic downturn caused by the pandemic.
While the PPP provided forgivable loans to help cover payroll and other eligible expenses, such as mortgage interest, rent, and utilities, the ERC is a refundable tax credit solely intended to keep workers employed. It provides eligible employers with tax credits for qualified wages they paid to their employees.
Initially, businesses that received PPP loans were not eligible for the ERC tax credit. But changes to ERC eligibility outlined in the Consolidated Appropriations Act of 2021 made it so that a business that received a PPP loan could still apply for the ERC.
However, there are certain limitations and rules that apply:
- You cannot claim the ERC for the same wages used to support your PPP loan forgiveness.
- You also cannot use the same wages for the ERC and other tax credits, such as the Work Opportunity Tax Credit and the Family and Medical Leave Act Credit.
How to apply:
The PPP ended May 31, 2021, but you might still be eligible to receive thousands of dollars in tax credits through the ERC. Eligible businesses can claim the credit for qualified wages paid between March 13, 2020, and December 31, 2021. If you missed claiming the Employee Retention Credit, you can retroactively claim it by amending your previous tax returns or filing an adjusted return.
If you received a PPP loan, there’s no reason not to apply for the ERC tax credit. Miami CFO can provide valuable insight into how the PPP affects your eligibility for the ERC and other tax credits. Let us help you navigate the rules and mitigate the financial losses you incurred during the pandemic. Schedule a meeting with us today by visiting https://calendly.com/miami-cfo/.