When you ask CFOs and business owners whether or not they’ve heard about the Employee Retention Credit or the ERC, they’ll answer in the affirmative. But the moment you question them further about the program, you’ll probably get to know that they have just applied for the PPP (Paycheck Protection Program) loans and they think they’re similar to ERC.
If you too are an employer who is not sure about how ERC works, click here to learn more about it. Here are a few things that you should know about this government-backed program.
There is no similarity between PPP and ERC
Although both are a part of the CARES (Coronavirus Aid, Relief, and Economic Security), the ERC isn’t similar to the PPP. This is nothing but supplemental credit and no company should miss out on this benefit without realizing it.
This ERC program was introduced to assist businesses in retaining their workers and staying away from forced layoffs during the pandemic situation. Eligible businesses receive a per-employee credit and this amount is based on a percentage of qualified health insurance benefits and wages paid to workers.
Is it still given to businesses that took out PPP loans?
After the Consolidated Appropriations Act was passed in December 2020, this restriction was done away with. Hence, the employers who had already applied for PPP loans could again apply for the ERC and they could do that during the initial three quarters of 2021.
The businesses that retained their employees throughout 2020 and 2021 could still qualify for this credit, even after receiving PPP loans. As the pandemic is still there and there are many small and medium-sized businesses that are still bearing the brunt, obtaining this extended credit makes good sense for the business.
Who qualifies for ERC?
ERC is a redeemable tax credit that can be claimed quarterly from 12th March 2020, till the end of December 2020 along with the initial quarters of 2021. An employer can claim this credit and offer a payroll reduction during that time period.
Two categories of employers can qualify for ERC – small and large. The size of a business depends on the total number of full-time employees. Large companies are those that have more than 100 employees.
So, now that you know the details of ERC and how it is a boon for businesses and employers, you can file for the claim if you think you qualify.