The Employee Retention Credit (ERC) is a valuable tax credit that businesses can apply for to keep their employees on the payroll during the COVID-19 pandemic. It is not included in employee gross income, and it does not have to be repaid. Companies can now apply for both the Paycheck Protection Program (PPP) and the ERC, providing them with much-needed help. The ERC is a refundable tax credit for the salaries of qualifying employees, and it is not a loan or a tax.
Indirect costs are subject to the same rules as salaries and payroll taxes from the indirect cost fund if a real indirect cost rate is calculated and used. If a minimum rate of 10% is used, however, the indirect salaries used for the ERC will not affect the indirect costs allowed. Business owners often ask questions about whether ERC funds are taxable and how the entire tax process works with the employee retention tax credit. The IRS explicitly states that salaries used for payroll Protection Program loan forgiveness, grants for indoor operators, and Restaurant Revitalization Fund grants cannot be used for the purpose of the employee retention credit (ERC).
If your company qualifies, you can apply for both the FFCRA credit and the ERC credit for your retirement plans. Disaster loan counselors can help your business with the complex and confusing employee retention credit (ERC) and employee retention tax credit (ERTC) program. The ERC is a 100% refundable tax credit for companies that meet the requirements and can keep employees on the payroll.