ERC-Employee Retention Credit-In Addition to PPP

March 24th, 2021 at 12:37 PM

Before the December 27, 2020, enactment of the new COVID-19 relief law, you may have chosen the Paycheck Protection Program (PPP) loan and given no thought to the employee retention credit.

Remember, under the original law, you had to choose between the retention credit and the PPP loan. Millions chose the PPP loan route.

But now the game has changed. You may, as a PPP recipient, qualify to take the employee retention credit retroactively for tax year 2020 quarters and also going forward in tax year 2021.

Here are the key changes you as a PPP player need to know:

• PPP loan recipients can retroactively claim the 2020 employee retention credit for wages not paid with forgiven PPP loan proceeds.
• Wages paid from March 13, 2020, through December 31, 2020, qualify for the retroactive credit.
• Wages paid from January 1, 2021, through June 30, 2021, can qualify for the more significant 2021 credit.
• For 2021 quarters only, you qualify for the credit if your business experienced (a) a full or partial suspension of the operation of its trade or business during this period because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or (b) a decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80 percent of the gross receipts in the same calendar quarter in 2019.
• For 2021 quarters only, the relaxed requirements for qualifying wages apply to businesses with 500 or fewer full-time employees in 2019.

Mark S. Fineberg, CPA