There’s additional funding available and the eligibility requirements for previously established funding opportunities have changed! At Christianson PLLP, we want you to be aware of opportunities for funding during this difficult time. According to the Consolidated Appropriations Act, 2021, you may be able to take advantage of both Paycheck Protection Program (PPP and PPP2) loans as well as the Employee Retention Credit (ERC).
The ERC is a refundable credit against payroll for “qualified wages” that were paid by employers who were hurt by coronavirus but retained their employees. There have been several changes relating to the ERC which can provide your business additional opportunity for relief and these include:
- Extension through June 30, 2021
- Increased credit rate from 50% to 70% of qualified wages
- Increased the limit on per-employee qualified wages from $10,000 for the year to $10,000 for each quarter
- Reduced year-over-year gross receipts decline requirement from 50% to 20%
- Created a safe harbor to allow employers to use prior-quarter gross receipts to determine eligibility
The legislation means that employers who have received or will receive PPP loans may still qualify for the ERC retroactive to March 13, 2020.
Previously, receiving a PPP loan during the first round of relief prevented you from taking advantage of the ERC. However, with the new legislation, a business can take the ERC even if that business received PPP funding and loan forgiveness as long as the payroll identified for the ERC was not paid out of PPP funds. As noted above, this change is retroactive to March 13, 2020.
This bill allows eligible entities to claim the prior quarter’s credits from 2020 in the quarter in which the bill was signed: the fourth quarter of 2020.
The ERC is a fully refundable payroll tax credit for employers that, for 2020, is equal to 50% of qualified wages employers paid beginning March 13, 2020. Businesses are eligible if:
- They were fully or partially suspended due to an order from a governmental authority limiting travel, business and meetings during the quarter of payroll not paid out of PPP funds, or:
- The business had a reduction in gross receipts of 50% or more during a calendar quarter compared to the same calendar quarter in 2019.
When the covered period for PPP loans was extended to 24 weeks, many clients’ applications for debt forgiveness qualified for 100% forgiveness on payroll alone without considering the other eligible nonpayroll costs. However, those other costs now may play a big role in receiving the ERC benefit.
If you have fewer than 100 employees, the credit applies to all employee wages paid. If you have more than 100 employees, there are further restrictions in analyzing the ERC opportunity.
Contact our experts today to determine your eligibility and to help you through this challenging financial time.