PPP Recipients are now Eligible for the Employee Retention Credit
January 7, 2021 | CAA, Employee Retention Credit, ERC, Payroll Protection Program, PPP
On December 27th, 2020, a new economic stimulus package, the Consolidated Appropriations Act, 2021, (the “CAA”) was signed into law. This package provides an additional round of relief measures put in place to help individuals and companies affected by the Covid-19 pandemic. Though there are similarities between this Act and the previous CARES Act, key differences have the potential to provide even more relief to employers than before, especially for Payroll Protection Program (PPP) loan recipients.
Under the previous CARES ACT, PPP loan recipients were unable to claim the Employee Retention Credit (ERC). The ERC is a refundable tax credit against social security taxes up to $10,000 for each employee per quarter. Eligible employee wages are those paid to employees not providing services because operations were suspended or due to a decline in gross receipts. A sister provision, the Families First Coronavirus Response Act (“FFCRA”) extended this credit to include employees quarantining, experiencing COVID-19 symptoms, caring for a relative with COVID-19, or caring for a child whose school or child-care provider is closed due to COVID-19.
Under the CAA, PPP loan recipients are now able to claim the credit on employees not paid using the PPP loan funds.
Additionally, an eligible employer can now claim the credit against up to 70% of the employer’s share of social security taxes equal to $10,000 qualified wages per employee per quarter. This is a huge change from the previous $10,000 limit per employee. It also extends the credit to June 30, 2021 and extends availability to more companies that meet the below criteria:
An eligible employer with less than 500 employees is now able to claim this credit which is an increase from the previous 100 employee limit.
The ERC is now available to employers that have experienced a 20% or more decline in gross receipts as opposed to the 50% under the CARES Act.
These changes can provide additional relief to your company as we continue to face challenges in various industries across the country. If your company was a PPP loan recipient that meets the previous requirements, please reach out to the Probity Tax Recovery Team. We want to ensure that you are aware and taking advantage of each form of relief available as we continue through this new year.