You may want to hold off on filing for your PPP Loan Forgiveness, there are potentially big tax credits available to you.
In addition to creating a second round of PPP funding, the new stimulus bill made a significant– and retroactive– change to the first PPP program.
Companies that took a PPP loan and which meet certain criteria, will ALSO be eligible to take the Employer Retention Credit (ERC), up to $5,000 per employee for 2020. The ERC limit increases to $14,000 per employee in 2021. Prior to this legislation, you could only take the PPP or the ERC. There are some restrictions on who is eligible to take the ERC, but this change can add up to big money for some small businesses.
But be careful, you can’t double-dip.
If you claim payroll costs for PPP, you can’t claim the same dollars for ERC. That means you’ll need to re-think your PPP Loan forgiveness calculations to ensure you can take full advantage of both programs.
Confused? We know… and there are quite a few questions still outstanding– even before the Treasury starts rolling out guidance around the new stimulus plan.
Here’s what you need to do next to claim the Employee Retention Credit:
1.) Determine if you qualify for the 2020 ERC:
– Were you shut down by the government due to COVID restrictions?
– Did you have a single quarter whose gross receipts were down by 50% vs the same quarter in the previous year.
2.) Determine if you qualify for the second round of PPP funding (PPP2):
– Do you have less than 300 employees?
– Will you or have you used all of your PPP funds?
– Did you have a single quarter where gross receipts were down by 25% vs prior year’s quarter?
3.) Get professional help. Once you know if you qualify, it’s highly recommended that you get professional help in doing the calculations to ensure you can capitalize on PPP forgiveness and maximize your ERC.
If you feel like you need help navigating through the PPP process or the Employee Retention Credit, please don’t hesitate to give us a call.