The employee retention credit (ERC) is one of the most lucrative opportunities business owners should take advantage of. However, many business owners are prematurely disqualifying themselves due to misinformation and rumors about who does or doesn’t qualify.
The ERC has gone through significant updates since its original release. Even if you and your advisors have reviewed this before, we encourage business owners to take another look to uncover all qualifying activities and wages that will maximize your benefit and/or refund.
Eligible Employers Can Claim an ERC (even if they received a PPP loan)
Eligible employers can still claim an ERC with respect to qualified wages, even if they received a PPP loan. The restriction is that you cannot use the same wages to qualify for forgiveness of a PPP loan and as qualified ERC wages.
This means an employer could use both if:
- The employer’s qualified wages were not provided by PPP loan proceeds (i.e. they did not use the PPP loan proceeds to pay the wages that they are claiming an ERC for), and;
- The employer’s qualified wages were obtained from PPP loan proceeds, but were not required for or used to obtain loan forgiveness.
Examples of Employers Being Able to Utilize PPP and ERC
- If the employer included qualified wages on the PPP forgiveness application, those qualified wages are not eligible for an ERC. However, if the employer has additional qualified wages for the same period that were not included on the forgiveness application, the employer can then seek an ERC for such additional qualified wages.
- An employer uses qualified wages to apply for PPP forgiveness in an amount equal to 60 percent of the PPP loan and other eligible expenses for 40 percent. Any qualified wages in excess of the 60 percent figure could still qualify for an ERC.
The important thing from the IRS perspective is what was included in the PPP forgiveness application.
- If the qualified wages are being relied upon for forgiveness, then they are ineligible.
- If a combination of payroll costs and other eligible expenses are being relied upon, then qualified wages in excess of what is necessary for forgiveness can be eligible for an ERC.
- If the PPP loan is not forgiven (and will not be), then all wages are eligible.
With the latest expansions to this credit, FCA members are well positioned to maximize their benefit if you experienced a disruption, saw a decrease in revenue, were unable to visit client sites or had to change your day-to-day business operations. To learn how you can qualify under the new version of the Employee Retention Credit contact your tax advisor or click on the following link (https://www.alliantgroup.com/services/employee-retention-credit/) or contact Jennifer Groff at Jennifer.firstname.lastname@example.org to learn how you qualify.