Employee Retention Credit vs PPP
The employee retention credit is a refundable tax credit. This is your money to keep. The PPP is a loan that must be repaid. The PPP loan comes with restrictions. There are no restrictions on the Employee Retention Credit. This is a credit for business owners who kept staff on payroll during the Covid-19 restrictions.
- Up to $26,000 per W-2 employee
- ERC is a refundable tax credit (it is not a loan like PPP)
- No restrictions on use
- No limit on funding
- Qualify with full/partial closure, supply chain disruption, or reduced revenue
- Qualification approval within 2–3 weeks
- IRS distributes your funds within 3–6 months
May an Eligible Employer that receives a Paycheck Protection Program (PPP) loan receive the Employee Retention Credit?
No. An employer may not receive the Employee Retention Credit if the employer receives a PPP loan that is authorized under the CARES Act. An Eligible Employer that receives a PPP loan, regardless of the date of the loan, cannot claim the Employee Retention Credit.
Is an employer that repays its Paycheck Protection Program (PPP) loan by May 18, 2020, eligible for the Employee Retention Credit? (updated May 26, 2020)
A. Yes. An employer that applied for a PPP loan, received payment, and repays the loan by May 18, 2020 (originally May 7, 2020, as provided by the Limited Safe Harbor With Respect to Certification Concerning Need for PPP Loan Request in the Interim Final Rules issued by the Small Business Administration (SBA) effective on April 28, 2020, but extended by FAQs 43 and 47 in the SBA’s PPP FAQs updated on May 5, 2020 and May 13, 2020, respectively), will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employer is otherwise an Eligible Employer.
Are employers in U.S. Territories eligible for the Employee Retention Credit?
Yes. Employers may claim the Employee Retention Credit for payments of “qualified wages.” Section 2301(c)(5) of the CARES Act provides that qualified wages are wages as defined in section 3121(a) of the Internal Revenue Code (the “Code”) for purposes of the Federal Insurance Contributions Act (“FICA”) tax. Under section 3121(b) of the Code, payments of wages by employers in U.S. Territories are subject to FICA. Accordingly, Eligible Employers include employers in the U.S. Territories that pay qualified wages and otherwise meet the requirements for the credit.
Are self-employed individuals eligible for the Employee Retention Credit?
Self-employed individuals are not eligible for the Employee Retention Credit with respect to their own self-employment earnings. However, a self-employed individual who employs individuals in its trade or business and who otherwise meets the requirements to be an Eligible Employer may be eligible for the Employee Retention Credit with respect to qualified wages paid to the employees.
If you want to check your eligibility and the credit amount owed to you for retaining staff, contact us. We can determine your credit amount and file the necessary paperwork on your behalf.
