In March 2020, the CARES Act created the Employee Retention Credit (ERC), which allowed qualifying employers of any size to claim a refundable payroll credit for up to 50 percent of qualifying wages, with a maximum of $10,000 per employee ($5,000 of credit). Later, in December, the Consolidated Appropriations Act (the Bill) significantly expanded ERC’s eligibility to include Paycheck Protection Program (PPP) loan recipients and the actual credit dollars available for employers for the first two quarters of 2021. (For additional details /our-thoughts-on/stimulus-package-enhances-employee-retention-credit.)
While the Bill has created additional opportunity for taxpayers to receive much needed financial assistance, without careful planning and consideration, taking advantage of one program may limit or even eliminate your ability to benefit from others. Here are some things to consider:
- While the Bill enables PPP loan recipients to retroactively claim the ERC for 2020, how a taxpayer completes the loan forgiveness application may limit or even eliminate the opportunity to do so.
- Certain payroll expenses may be eligible for more than one program (e.g., the PPP, ERC, the R&D Tax Credit, WOTC, etc.), but they may only be claimed toward one program. As such, thoughtful consideration should be given to which programs result in the greatest benefit to your organization and whether other nonpayroll expenses could be included, for example, as part of the PPP loan forgiveness application.
- If your organization has obtained a PPP Loan and has not yet filed an application for loan forgiveness, it may be prudent to pause and assess the interplay between the various programs before submitting your application.
Due to the obvious allure of a forgivable loan with the PPP, many businesses disregarded the ERC because they could derive more benefit from the PPP. Now, with the ERC back in play even for PPP borrowers, it’s necessary for every borrower to quickly determine if they’re eligible for the ERC and, if so, to determine the interplay with PPP loan forgiveness and other credit and incentive programs.
Our skilled professionals stand ready to help your organization carefully consider the best way to maximize the benefits you receive from the PPP, ERC and other payroll-related credits and incentives. For additional information or assistance with the ERC, reach out to any of your contacts at Schneider Downs or contact Matthew Werner at [email protected] or Ross Alessandro at [email protected].
If you have questions regarding PPP matters, contact Joel Rosenthal at [email protected].
