The Consolidated Appropriations Act allows employers who receive a Paycheck Protection Program (PPP) loan to also be eligible for the Employee Retention Credit (ERC). However, the caveat is that you cannot use the salaries that qualify you for PPP loan forgiveness to determine the amount of your ERC. Different salaries must be used when applying for each program. While a business owner can only declare approximately forty percent of the loan amount for non-payroll expenses, this can help free up the salary that they can use for the employee retention credit.
In addition to the PPP, companies have the opportunity to take advantage of employee retention credits. The ERC is not as good as the usual tax credit because taxable income increases in the amount of the credit. Cherry Bekaert's tax team hosted a roundtable discussion on February 9 on PPP loans and employee retention credit. In the case of ERC, only employees who provide services in the United States are considered in the count of full-time employees to determine the size of the employer.
The Consolidated Appropriations Act has opened up a great opportunity for businesses to take advantage of both PPP loans and employee retention credits. By freeing up salary that can be used for employee retention credits, businesses can maximize their savings and ensure that their employees are taken care of during this difficult time. It is important to note that businesses must use different salaries when applying for each program in order to maximize their savings. Businesses should consult with their tax advisors to ensure they are taking full advantage of both programs and maximizing their savings.