Paycheck Protection Program and Employee Retention Credit (ERC)
Now you can be eligible for both PPP and ERC but there’s a strategy. Let us help you maximize cash flow by using PPP and ERC together.
Paycheck Protection Program, ERC, and EIDL
PPP and Employee Retention Credit (ERC)
PPP is not the only relief available to businesses.
PPP borrowers are now eligible to obtain the Employee Retention Credit (ERC). However, only wages that were NOT covered by a forgiven PPP Loan or another tax credit program are eligible. This means a proactive strategy is needed to maximize PPP loan forgiveness and fully leverage the benefits of ERC.
On March 1, 2021 the IRS released fresh guidance for employers claiming the ERC for 2020 calendar quarters. This includes guidance on excess payroll costs for PPP Loans that have already been forgiven, defining a nominal impact, and substantiation requirements. Read the full notice here.
FHF can help you create an overarching strategy that incorporates PPP, ERC and other tax credits and incentives to help you maximize cash flow. Contact Brandon Gross, CPA to begin crafting your strategy.
How to Calculate Maximum ERC Amount
Here’s what you need to know as an employer to take advantage of this updated credit.
If eligibility criteria are met, the Maximum Credit Amount is:
From March 12, 2020 through December 31, 2020:
Credit capped at $5,000, per employee, for all qualified wages paid (the credit for $10,000 in qualified wages X 50% tax credit rate)
Employee A:
2020
- Qualified Wages $10,000
- Credit Rate 50%
- Credit Available $5,000
From January 1, 2021 through June 30, 2021:
The per employee qualified wage limit for the credit calculation is $10,000 per quarter (including some health care costs) and the credit amount is increased to 70% with a max of $7,000 per quarter (up to $14,000 through 6/31/2021).
Employee A:
Quarter 1
- Qualified Wages $10,000
- Credit Rate 70%
- Credit Available $7,000
2021 Quarter 2
- Qualified Wages $10,000
- Credit Rate 70%
- Credit Available $7,000
Total Credit Available, per Employee:
- 2021 Quarter 1 $7,000
- 2021 Quarter 2 $7,000
- Total $14,000
Want our help in developing your PPP/ERC strategy? Call or email Brandon Gross, CPA or fill out our contact form.
Beyond PPP: Economic Injury Disaster Loan
Consider the Economic Injury Disaster Loan (EIDL) if you do not qualify for a PPP Loan, or if you received one and still need additional funds.
EIDL provides low interest (3.75% for businesses, 2.75% for nonprofits) loans with a 30 year maturity to be used on nearly anything from rent, utilities, payroll, healthcare benefits, etc.). They cannot be used to pay-off old debts, refinance another debt, or buy capital assets, new construction, vehicles, etc.
Unlike PPP, they are not forgivable and must be repaid (unless you received a EIDL Advance already) but with the low interest rate, it might be worth considering as way to provide further economic relief.
To see if EIDL could fuel your business, call or email Brandon Gross, CPA or fill out our contact form.
Additional Resources
PPP Client Case Study:
FHF helped Detmer & Sons avoid a common mistake businesses made with First Draw Loan applications.
https://fhf-cpa.com/case_studies/detmer-and-sons-inc/
PPP Client Case Study:
FHF helped Rusty Taco and Milano’s put employees first with PPP.
https://fhf-cpa.com/case_studies/threewitt-enterprises/
Recording of our Free Webinar:
PPP: Proven Strategies, Common Mistakes, and Myths Debunked
https://fhf-cpa.com/free-ppp-webinar/
We are currently assisting businesses like yours navigate the complicated PPP loan forgiveness process. Our clients have loans of all sizes through a variety of lenders from community banks and credit unions to large retail banking institutions. Even if you are not a current client, we can help you develop a strategy for achieving maximum PPP loan forgiveness.
PPP Loan Forgiveness
The Process:
- Contact us to begin the assessment.
- First, we will have an initial discussion to gain a better understanding of your individual situation.
- Then we will analyze, compile, and format the information and required reports with the goal of obtaining full forgiveness.
- Finally, we will factor in other PPP-related considerations including:
- Potential tax implications related to your PPP loan.
- Whether you can also benefit from the Employee Retention Credit.
- If your loan is over $2M and subject to audit, we can help you compile and complete the additional documentation required.
If you would like to discuss retaining our services to help craft your forgiveness strategy, call or email Brandon Gross, CPA or fill out the form below and he will contact you.