Can a Business Who Received PPP also Claim ERTC? 

 December 17, 2023

By  Jace W Campbell, CPA

Can a Business Who Received PPP also Claim ERTC

As a business owner, navigating the financial landscape in the wake of COVID-19 can be challenging…especially when it comes to understanding the various programs and credits available to you. Two such mechanisms that have generated much interest—and confusion—are the Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP).

What is the Employee Retention Credit?

The ERC, as defined by IRS.gov, is a fully refundable tax credit for employers who had business operations suspended due to government orders or saw a significant decline in gross receipts…A key aspect of this program is that it incentivizes employers to keep employees on their payroll during periods of disruption.

How Confident Are You In Your ERTC Eligibility?

Watch Our Video Explaining the Fraud We’ve Seen From National ERC Promoters

Who Qualifies for ERC?

When it comes to the Employee Retention Credit (ERC), understanding the eligibility requirements is crucial… This is because these prerequisites set the stage for whether a business can avail of this beneficial tax credit.

At its most basic level, eligibility for the ERC depends on two main factors… Firstly, businesses that experienced full or partial suspension of operations due to a governmental order relating to COVID-19 may qualify… Secondly, firms that saw a significant decline in gross receipts compared to the same quarter in 2019 are also potentially eligible.

The concept of “significant decline” is key here. As per IRS guidelines, a “significant decline” commences with the first quarter in which an employer’s gross receipts for a calendar quarter fall below 50% of its gross receipts for the same calendar quarter in 2019… The decline ends with the first calendar quarter that follows the first calendar quarter for which the employer’s gross receipts are greater than 80% of its gross receipts for the same calendar quarter in 2019.

But what constitutes “full or partial suspension”? This is where nuances come into play. According to IRS.gov, if a governmental order has more than a nominal effect on your business operations then you are considered to have had a full or partial suspension… Factors such as business hours and ability to continue operations (perhaps at a reduced capacity) play into this determination.

It’s also important to note that eligibility extends across different types of businesses. For instance, tax-exempt organizations under Section 501(c) of the Internal Revenue Code are eligible… Similarly, State or local government-run colleges, universities and hospitals can also qualify.

However, remember – not all entities can claim this credit. Businesses that took small business loans under the Paycheck Protection Program (PPP) cannot claim ERC for wages that were paid during the period covered by PPP loan proceeds.

As you can see, qualifying for the ERC involves multiple considerations and careful assessment of various factors… Thus, professional advice can often be invaluable to navigate through these complexities and ensure your business gets the maximum benefits it deserves.

PPP: The Basics

Moving onto PPP, as detailed by Treasury.gov, it’s essentially a loan designed to provide direct incentives for small businesses to retain their employees during crisis periods… The crux here is that if all employees are kept on payroll for eight weeks and the money is used for specific costs, these loans can be fully forgiven.

Balancing PPP with ERC

When it comes to maximizing financial relief for businesses during these challenging times, the interplay between Paycheck Protection Program (PPP) and Employee Retention Credit (ERC) often emerges as a key area of concern… It’s not uncommon for businesses to wonder whether they can reap the benefits from both these programs.

Originally, the answer was a straightforward ‘No.’ The CARES Act initially prohibited companies from receiving both PPP loans and ERC… But like many aspects of life in this pandemic era, things changed.

The Consolidated Appropriations Act 2021 brought about a significant shift in this scenario. It allowed employers to benefit from both PPP loans and ERC. However, it’s not quite as simple as it sounds… There are specific criteria that need to be met.

Essentially, an employer is now eligible for ERC even if they received a PPP loan. But—and this is important—the same wages cannot be counted both for seeking forgiveness of the PPP loan and calculating the ERC… As stated by Forbes, this is akin to “double-dipping” and is not permitted by the IRS.

This change means that businesses need to tread carefully while calculating their credits or seeking loan forgiveness… Employers must ensure they do not use ‘PPP wages’—i.e., wages paid with proceeds of a forgiven PPP loan—for claiming their Employee Retention Credit. This calls for strategic planning on how best to utilize your workforce costs so you can maximize both your loan forgiveness and tax credit amounts.

It’s worth noting that this change applies retroactively, meaning businesses who received PPP loans in 2020 can still claim their ERC if they meet all eligibility requirements.

But keep in mind—the calculation and implementation process can be complex. Every business has unique circumstances that could affect its eligibility for these programs or amount of credit that can be claimed… Therefore, engaging with an experienced advisor can help streamline the process and ensure you’re not leaving any money on the table.

Ultimate Guide To ERTC: What You Need To Know

When considering the ERC, it’s important to understand the intricacies of how this tax credit works… This includes eligibility criteria, calculation of the credit, and its interaction with other tax provisions.

How is ERTC Calculated?

Understanding the calculation of the Employee Retention Credit (ERC) is crucial to know how much your business stands to gain from this program… After all, it’s not just about qualifying for the credit; it’s also about maximizing its potential benefits.

At its core, the ERC calculation is relatively straightforward. According to the “Ultimate Guide to ERTC”, you can claim a credit of up to 70% on $10,000 in qualified wages per employee for each quarter… To put it plainly, this equates to a maximum credit of $7,000 per employee per quarter.

But what exactly are ‘qualified wages’? The IRS defines them as including not only regular salary or hourly wages but also certain other amounts paid by an employer. These encompass portions of health plan expenses paid by an employer, as well as any pre-tax contributions made by an employee… In essence, it’s a comprehensive view of compensation rather than just basic salary.

It’s also important to note that there are different rules for small and large employers. If your business has more than 100 full-time employees (as per 2019 figures), then qualified wages include only those paid to employees who are not providing services due to COVID-19 disruptions… However, for businesses with 100 or fewer full-time employees in 2019, all wages paid during eligible quarters may be considered as qualified wages.

Another crucial aspect is the timing. For example, credits for 2020 cap at $5,000 per employee annually—50% of up to $10,000 in qualified annual wages. However, this was significantly enhanced for 2021 with the maximum amount increasing tenfold—70% of up to $10,000 in qualified quarterly wages.

But remember – while these basics provide a foundation for understanding ERC calculation, they don’t cover every nuance and unique scenario… Therefore, for an accurate calculation tailored to your business, it’s wise to consult with professionals who specialize in this field. They can guide you through the intricacies and help ensure you claim the maximum credits possible.

Interaction with Other Tax Provisions

Understanding how the Employee Retention Credit (ERC) interacts with other tax provisions is an essential aspect of maximizing your financial benefits… After all, tax legislation is a complex tapestry, and knowing how different threads intersect can be the key to unlocking significant savings.

One key interaction to note is between the ERC and the Work Opportunity Tax Credit (WOTC)… These two provisions, while both advantageous for businesses, cannot be applied simultaneously on the same set of wages. In other words, if you’re claiming WOTC for an employee, you can’t also claim ERC for that same employee’s wages during the same period… This policy of no “double-dipping” is crucial to keep in mind when planning your tax strategy.

The WOTC is a federal tax credit available to employers who hire individuals from certain targeted groups facing significant barriers to employment… So, while it’s definitely beneficial, you’ll need to weigh it against the potential benefits from ERC when deciding which one to utilize for each employee.

Another notable interaction involves PPP loans. As mentioned earlier, businesses can now take advantage of both PPP loans and ERC due to changes in legislation… However—once again—there’s no double-dipping allowed. You cannot use ‘PPP wages’, i.e., wages paid with proceeds from a forgiven PPP loan, when calculating your ERC.

Furthermore, it’s important to understand how ERC relates to the Families First Coronavirus Response Act (FFCRA)… FFCRA provides tax credits for eligible employers that provide paid sick leave or expanded family and medical leave related to COVID-19. Just like with WOTC and PPP, you can’t claim ERC on wages used towards these FFCRA credits.

In conclusion – understanding these interactions can get quite complex but is vital for ensuring your business capitalizes fully on available relief measures without running afoul of IRS regulations… Given these complexities, working with experienced tax professionals can help you navigate these interactions and optimize your financial strategy.

Navigating Through Uncertainties With JWC ERTC Advisory CPA

While these programs provide financial relief for businesses, understanding and applying them can be fraught with uncertainties… That’s where JWC ERTC Advisory CPA comes into play.

Why Choose JWC ERTC Advisory CPA?

JWC ERTC Advisory distinguishes itself from other firms by providing personalized service that takes into account your unique business situation… Our approach ensures that you get maximum benefits while remaining compliant with all legal requirements.

The Importance Of Staying Compliant

Recently there has been a crackdown by the IRS on ERC promoters suspected of fraudulent activities. This underlines how vital it is for businesses seeking assistance in claiming their credits or loans to partner with reputable firms… We understand that compliance is key and we work tirelessly to ensure that your claims are legitimate and maximized.

Remember – taxpayers who previously filed for ERTC but have questions about their eligibility can engage JWC ERTC Advisory for an independent review… After all, knowledge is power when it comes to navigating these complex financial waters.In conclusion, the employee retention credit and PPP offer valuable relief for businesses affected by the pandemic… However, understanding these programs and their nuances is essential for maximizing their benefits. As such, engaging a reliable advisory like JWC ERTC Advisory CPA can provide clarity amidst uncertainty, ensuring you’re on the right path to financial recovery.

Jace W Campbell, CPA

Jace founded JWC ERTC Advisory CPA in March 2021 as the nation's first and only public accounting firm focused solely on ERC . . . and nothing else. He has personally signed over 9,000 ERTC claims and is proud to be executing these claims conservatively, and how intended by Congress.

He has a passion for educating clients so they can make the best decision for themselves.  If you read articles and watch videos that Jace produced in 2021, his approach is the same now as it was then.

While other firms pivot their messaging to comply with new IRS guidance, Jace continues preaching the same conservative principles that have helped clients recover hundreds of millions . . . while sleeping easy at night.

related posts:

Can You Claim Employee Retention Credit in 2023?

Can You Claim the Employee Retention Credit in 2022?

Employee Retention Credit Scams: What You Need to Know

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