Can PPP Forgiveness be Counted as Income for Employee Retention Credits?

Taxpayers cannot claim the Employee Retention Credit (ERC) on PPP salaries used for the forgiveness of Paycheck Protection Program (PPP) loans. While forgiven PPP loans are excluded from taxpayers' gross income, they must be included in gross income for other purposes, such as proof of gross income and certain filing requirement thresholds for tax-exempt organizations. Neither PPP loan forgiveness, grants for closed space operators, nor grants for restaurant revitalization are included in federal taxable income. However, they could be counted as gross income under a strict interpretation of Section 448 (c) of the Internal Revenue Code (IRC) and related regulations.

The three main differences between the Paycheck Protection Program (PPP) and Employee Retention Credits (ERC) are the type of funding when the company receives the funds and the cost of the program. The IRS recently published a new guide on the Employee Retention Credit (ERC) that creates a safe haven to exclude the forgiveness of Paycheck Protection Program (PPP) loans and other grants from the gross income test, and answers important questions about the definition of full-time equivalents and qualifying salaries. You can use the worksheet to verify that your documentation for applying for the employee retention credit and the PPP is accurate and complete. Yes, even if you have applied for a Paycheck Protection Program (PPP) loan, you can collect the employee retention credit.

As a result, you'll need to check with your accountant or public accountant to see if your company is eligible to receive this employee benefit credit for practical purposes. In addition to the PPP, companies have the opportunity to take advantage of Employee Retention Credits. The Employee Retention Credit is a valuable tax benefit that can help businesses offset some of their costs associated with keeping employees on payroll during difficult times. It is important to understand how this credit works and how it interacts with other programs such as the Paycheck Protection Program (PPP).

Companies should consult with their accountant or public accountant to determine if they are eligible for this credit and how it can help them save money on taxes.