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COVID-19 Update: PPP Loans and Employer Retention Credit (ERC)

access_time Posted on: January 12th, 2021
Are you currently a Paycheck Protection Program (PPP) borrower considering eligibility for an Employer Retention Credit (ERC)? If so, the Consolidated Appropriations Act, 2021 may now provide you with an opportunity to claim this credit. ERCs can now be retroactively claimed by PPP borrowers for the year 2020 and subsequently, in 2021.

In Section 206 of the Act, the ERC was expanded to include PPP borrowers as claimants, and the credit can now be backdated to March 12, 2020. Employers are permitted to claim a credit of 50% of qualified wages, in which the qualified wage paid to each employee is capped at $10,000 for the year of 2020.

Distinctly, Section 207 extends the ERC program from January 1, 2021, through June 30, 2021. In determining qualification, employers with 500 or fewer employees may now be eligible. The act also increased the credit percentage limit from 50% to 70% and the limit on per-employee creditable wages from $10,000/year to $10,000/quarter. Furthermore, the required year-over-year gross income declined from 50% to 20%; employers may utilize prior quarter gross receipts to calculate eligibility. These computational modifications cannot be claimed retroactively and are solely applicable to the abovementioned 2021 time frame.

If you are a newly established business, additional rules allow the ERC to be claimed by employers who were nonexistent for all or part of 2019. Certain public instrumentalities are permitted to claim the credit as well. 

Keep in mind, the last date to apply for PPP loans is March 31, 2021. Funding is not guaranteed, and it is unknown whether supplementary resources will be provided in the future.
Visit the IRS website for more information

Jasmine Butler, Esq.


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