The COVID-19 pandemic continues to rage and cause massive shortages, closures, and mass uncertainty. The government has passed many rounds of legislation over the last year and a half to help provide support for businesses and the nation throughout these times of uncertainty and financial strain.
The government passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) around March 2020. This provided some relief programs. One part of this was the PPP (Paycheck Protection Program). This PPP helped businesses retain their employees and hire back employees they had to furlough.
Expansion of the PPP and the ERC created under the same CARES Act created another measure of relief. This relief targeted employers who couldn’t pay their tax bill due to the COVID-19 issues. Whether certain businesses qualify is up to the organization to research and discover.
This guide is an informal manner in which to understand what the PPP loans cover, a review of the ERC, and other relevant details when looking for business relief throughout the pandemic.
The Paycheck Protection Program has helped many small businesses stay afloat. Loans under this program are implemented by the SBA (Small Business Administration) and the Treasury Department. For up to eight weeks of payroll costs, the mortgage interest, utility, and rent expenses are included.
Relief funding has helped multitudes of employers pay and manage their workers that would have either been fired or furloughed. The benefits of the PPP include that the government can forgive loans as long as some criteria is followed through.
Criteria being small businesses, veterans’ organizations, nonprofits, tribal businesses, self-employed individuals, and independent contractors are eligible if they are under the right standards. The government forgives PPP loans if 1) 60% of funds are spent on payroll costs, 2) Employee and wage levels remain the same, 3) Funds are spent only on payroll and other eligible expenses.
First and second-draw PPP loans exist because of some legislation that occurred after the CARES Act. Some businesses with a first-draw loan can re-apply and get second-draw up to May 31, 2021. Borrowers still existing can apply for PPP loan forgiveness until all of the funds are used up. The must make a forgiveness request within 10 months after the last day of certain periods according to the SBA.
The majority of businesses have already received a PPP loan, but if more assistance is necessary, some could qualify for the ERC. In this case, the ERC is a tax credit that replaces the business loan. Relief is both possible under the PPP and ERC initiatives. You are eligible if the below occurs:
Business operations must have been suspended during 2020/2021 because of a government order.
Reduction in Gross Receipts
Gross receipts must have decreased in both 2020 and 2021 when looking at the exact quarter of 2019. This decline must be around 50% for 2020 or down to 20% for 2021.
Managing Business 2020-2021
By remaining an employer in operation in 2020 or 2021, businesses will have few difficulties in meeting these requirements. Organizations were frequently affected negatively throughout the pandemic, and governmental orders maintained how these businesses could operate throughout COVID-19.
Contact ERC Benefits today to get more clarity on this system.
Some Facts About the ERC
The ERC is defined as a fully refundable tax credits that certain employers can benefit from in order to reduce their tax burdens. Some more facts about this amazing opportunity are shown below:
1. Credit Limits
The ERC from 2021 allowed for around 50% of qualified wages paid to employees. This spans the time period from March 12, 2020 to January 1, 2021. For all quarters, the maximum was $10,000 with the max at around $5,000 per employee.
In 2021, members of authority made the credit around 70% of wages, where the $10,000 limit applies each quarter. The maximum each employee can receive is around $28,000.
2. Loan Recipients of the PPP
Employers who received a PPP loan are also eligible for the ERC due to the Consolidated Appropriations Act of 2021. Wages that weren’t funded by the PPP loan will also qualify.
3. Health Care Expenses
The ERC allows healthcare expenses as qualified wages thanks to the CAA.
4. Cash and Credit Payments
The ERC isn’t issued as an income tax credit, but instead as a payment from the IRS.
5. IRS Form 941-X
Claiming the IRS Form 941-X or Amended Quarterly Payroll Tax Return can be done to claim the ERC. This can be accomplished up to three years after the tax return filing.
The Employee Retention Credit is a major benefit for employers, and the process can be very tedious or sometimes clear to understand. To make sure that things are as clear as possible during the process, reach out to your local ERC expert.
Reach Out Today
ERC Benefits are your helping hand when it comes to anything credit! We are your best source for reliable, expert, and ideal tax consulting services with quick and efficient filing processes. Not only is our team ready to help right away, the team can help answer your questions and see if BOTH the credit and the PPP loan can be attained.