PPP Borrowers May Now Claim Tax Credits for Wages Paid by Employers Under ERC
The recently passed stimulus bill retroactively allows PPP borrowers access to tax benefits, such as the Employee Retention Credit (ERC). Navigating the interaction between PPP and other programs is complex; effective business and tax planning will be crucial.
While PPP2 has received the most attention of any provision in the recently-passed stimulus bill (the Consolidated Appropriations Act, 2021 or “CAA”) the package also frees up significant amounts of money in tax benefits and expands eligibility for many programs. Reimbursements (in the form of tax credits) are newly available for qualified employee wages for many companies. We encourage clients to contact us now to review eligibility for these programs. The new stimulus bill also significantly changed tax treatment of PPP forgiveness and the program’s interaction with other relief programs. Many PPP borrowers are now eligible for significant tax relief under the CAA and should plan accordingly.
In this report, we cover some of the tax benefits available to PPP borrowers. Specifically, we cover:
The Employee Retention Credit (ERC)
- Credit for wages in 2020
- Credit for wages in 2021
- How it interacts with PPP
The Families First Coronavirus Response Act (FFCRA) credits
- The Emergency Paid Sick Leave Act (EPSLA)
- The Emergency Family Medical Leave Act (EFMLA)
- How they interact with PPP
Both of these credits offer sizable reimbursements for qualified employee wages, but their interaction with PPP and PPP forgiveness is complicated. For a more in-depth analysis of PPP2 other changes to PPP, see our previous report here. This report is not legal advice. Meet with advisors and CPAs about these planning tips.
Eligibility for the Employee Retention Credit (ERC) has been expanded
The ERC is a tax credit that qualified businesses can claim on qualifying employee wages. It reimburses eligible employers for a portion (50% or 70%) of qualified wages, which are capped. Eligibility has recently been expanded – we encourage clients to contact us now to review eligibility for this credit. The CAA extended the ERC through the second quarter of 2021, increased its value, and expanded eligibility. The credit works differently in 2020 and 2021, though some of the recent changes are retroactive to March 12, 2020.