Taxpayers cannot claim the Employee Retention Credit (ERC) on PPP salaries used for the forgiveness of 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. The payroll costs used for the forgiveness of PPP loans cannot also be used for the ERC. Employers should analyze the salaries paid to each employee to determine if a specific salary should be used for ERC or PPP loan forgiveness.
The biggest difference between the two programs is in the way they are funded. PPP loans must be repaid, with interest, even if the borrower ultimately qualifies for forgiveness. ERCs, on the other hand, do not have to be reimbursed. Another key difference is that PPP loans are available to companies of all sizes, while ERC is only available to companies with fewer than 500 employees.
The Paycheck Protection Program (PPP) provides a company with a forgivable loan. If they meet the terms of the loan, which include spending the funds on payroll or rent, there is no need to repay the loan. While the future remains uncertain, the PPP and the employee retention credit have been vital in helping companies overcome the pandemic so far. Yes, even if you have applied for a Paycheck Protection Program (PPP) loan, you can collect the employee retention credit.
The Employee Retention Credit (ERC) was expanded and amended by the United States Rescue Plan Act (ARPA). While both programs are designed to help companies during the COVID-19 pandemic, there are some key differences between them. The PPP provides much-needed financial assistance to small businesses, while the employee retention tax credit helps companies keep their employees on the payroll. You can use a worksheet to verify that your documentation for applying for the employee retention credit and the PPP is accurate and complete.
The three main differences between these two programs are in terms of type of funding, when a company receives funds and cost of program. As a result, ERC is more aimed at companies that have been most affected by the pandemic. In addition to this, only employees who provide services in the United States are considered in the count of full-time employees to determine size of employer when it comes to ERC. For more information on employee retention credit, visit IRS website or SnackNation's ERC FAQ Guide.