The Employee Retention Credit is a refundable tax credit that is available to employers who retained their employees during the COVID-19 pandemic.
The credit is equal to 50% of the qualifying wages paid to employees, up to a maximum of $10,000 per employee. The credit is available for wages paid from March 13, 2020 through the new sunset date of December 2021.
To be eligible for the credit, employers must have experienced a complete or partial shutdown of operations due to a COVID-19-related order from a governmental entity, or a significant decline in gross receipts.
The PPP is a loan program that is available to small businesses and certain nonprofit organizations. Loans are available for up to 2.5 times the organization’s average monthly payroll costs. Loan amounts are capped at $10 million. Repayment terms are flexible, and loans may be forgiven if used for certain eligible expenses.
Tip: Take this 60 second quiz to see if you prequalify for the ERTC today!
To be eligible for the PPP and PPP loan forgiveness, businesses must have fewer than 500 employees and must have experienced a decrease in business activity due to the COVID-19 pandemic. Businesses that are eligible for the employee retention credit are not eligible for the PPP.
The importance of PPP and ERC to business owners
The PPP and Employee Retention Credit are two essential tools that business owners can use to weather the storm of the pandemic. The PPP provides much-needed financial assistance to small businesses, while the Employee Retention Tax Credit helps businesses keep their employees on the payroll.
Together, these two programs have helped countless businesses stay afloat during these difficult times. While the future remains uncertain, the PPP and Employee Retention Credit have been vital in helping businesses weather the pandemic so far.
What is the Payroll Protection Program?
The Payroll Protection Program is a loan program that helps small businesses keep their workers employed during the COVID-19 pandemic. The program is administered by the Small Business Administration (SBA) and provides loans of up to $10 million to small businesses that are experiencing financial hardship due to the pandemic.
The loans can be used to cover payroll costs, rent, utilities, and other expenses. The loans are forgivable if the business uses the money to maintain or rehire employees. The Payroll Protection Program has been extremely successful, helping millions of small businesses across the country keep their workers employed.
What is the Employee Retention Credit?
The Employee Retention Credit is a tax credit designed to incentivize businesses to keep their workers on the payroll during the COVID-19 pandemic. The credit is available to businesses of all sizes, including sole proprietorships, partnerships, and corporations.
To be eligible, businesses must have experienced either a full or partial suspension of operations due to the COVID-19 pandemic, or a significant decline in gross receipts.
The credit is worth up to 50% of qualifying wages paid to employees, up to a maximum of $5,000 per employee. Businesses can claim the credit for wages paid after March 12, 2020, and before January 1, 2021.
For more information on the Employee Retention Credit, please visit the IRS website or SnackNation’s Guide to ERC Frequently Asked Questions.
What are the major differences between the ERC and PPP?
The Employee Retention Credit (ERC) is a refundable tax credit for eligible employers that retain their employees during the coronavirus pandemic. The credit is available to eligible employers who experience economic hardship as a result of the pandemic, and who maintain their employees’ salaries at pre-pandemic levels.
In contrast, the Paycheck Protection Program (PPP) is a loan program that provides small businesses with funds to help them cover their payroll and other expenses. The PPP is available to businesses of all sizes, and loans can be forgiven if certain criteria are met.
As a result, the PPP can provide much needed financial assistance to businesses that are struggling to keep their employees on staff. However, it is important to note that the ERC and PPP are not interchangeable; each has its own distinct eligibility requirements and benefits.
➜ Funding Differences: ERC vs PPP
While both programs can provide much-needed financial assistance, there are some key differences between them. The PPP is a loan program that provides funds to small businesses to help them keep their employees on the payroll. The ERC, on the other hand, is a tax credit that businesses can claim for eligible wages paid to employees during the pandemic.
The biggest difference between the two programs is in how they are funded. PPP loans must be repaid, with interest, even if the borrower eventually qualifies for forgiveness. ERCs, on the other hand, do not have to be repaid. Another key difference is that PPP loans are available to businesses of all sizes, while the ERC is only available to businesses with fewer than 500 employees.
Finally, PPP loans can be used for a wide range of expenses, including payroll, rent, and utilities. ERCs can only be used for wages paid to employees.
➜ Ranges of Awards
PPP
One of the key eligibility requirements for the Paycheck Protection Program (PPP) is that you have a maximum salary of $100,000. This means that if you or any of your employees make more than $100,000, you can only write $100,000 on your application. However, you can include other payroll expenses, such as health insurance, retirement contributions, paid sick leave, vacation pay, and severance pay.
These expenses will be calculated using your 2019 or 2020 payroll costs and either your net profit (for loans approved before March 3, 2021) or gross profit (for loans approved after March 3, 2021).
The PPP is a vital program that has helped many businesses stay afloat during the COVID-19 pandemic. By ensuring that businesses have the resources they need to maintain their payrolls, the PPP has helped to prevent widespread layoffs and economic devastation.
ERC
Here are some ranges of awards we’ve seen being granted by the IRS over the past year or so:
| # of Employees | ERC Award (Low) | ERC Award (High) |
| 5 | $25,000 | $130,000 |
| 10 | $50,000 | $260,000 |
| 15 | $75,000 | $390,000 |
| 20 | $100,000 | $520,000 |
| 25 | $125,000 | $650,000 |
| 30 | $150,000 | $780,000 |
| 40 | $200,000 | $1,040,000 |
| 50 | $250,000 | $1,300,000 |
| 75 | $375,000 | $1,950,000 |
| 100 | $500,000 | $2,600,000 |
| 150 | $750,000 | $3,900,000 |
| 200 | $1,000,000 | $5,200,000 |
| 300 | $1,500,000 | $7,800,000 |
| 400 | $2,000,000 | $10,400,000 |
| 500 | $2,500,000 | $13,000,000 |
*Important Note: This table serves as a broad estimate. This is not a guarantee. Every business is different. Speak to an ERC Expert to fully understand your qualification status and to calculate how much your award might be.
➜ ERC Refund Processing Time
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- The ERC is claimed on an employer’s quarterly Form 941, and the credit is refundable, meaning that employers can receive a refund if the credit exceeds their tax liability. The IRS has said that it will process ERC claims “as quickly as possible,” but it’s unclear exactly how long that will take. Hopefully, with the right documentation, employers will be able to receive their refunds within a few weeks of filing their returns. There are many ERC examples out there of companies receiving their refund within a month but be aware that it could take longer.
Can you qualify for both the ERC and PPP?
The answer is maybe. While the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) are both designed to help businesses during the COVID-19 pandemic, there are some key differences between the two.
The PPP provides loans that can be forgiven if the proceeds are used for eligible expenses, such as payroll costs or rent.
The ERC, on the other hand, provides a tax credit for businesses that retain their employees. As a result, it is possible to qualify for both programs, but it is important to understand the eligibility requirements to avoid ERC scams and how the two programs work before applying.
Is the PPP still available in 2023?
The PPP is no longer available after May 31, 2021. However, it is possible that the PPP could be extended again or that a similar program could be created in the future. If you are a small business owner or nonprofit leader, it is important to stay up to date on the latest information about the PPP and other financial assistance programs. You can also see if you qualify for an ERTC-backed loan where business owners can potentially receive an advanced payment of their ERTC in exchange for paying interest on their loan while they wait for the IRS to approve their claim.
How to see if you prequalify for the ERC
The Employee Retention Credit is a tax credit designed to encourage businesses to keep employees on their payroll during the COVID-19 pandemic. To qualify, businesses must have experienced a decrease in gross receipts of at least 50% when compared to the same quarter in the prior year. Businesses that are part of a controlled group or affiliated service group may qualify if any member of the group meets the gross receipts test.
Additionally, businesses that have been forced to close due to government orders are also eligible. To claim the credit, businesses must file Form 941, Employer’s Quarterly Federal Tax Return. We would also recommend connecting with an ERTC service to see if your claim qualifies in the first place.
For more information on the Employee Retention Credit, please visit the IRS website.
➤ You can also take a short quiz at ercassistant.com
Conclusion
The Employee Retention Credit and the Paycheck Protection Program are both designed to help businesses keep their workers during the COVID-19 pandemic.
The two programs have some similarities, but there are also some important differences. The Employee Retention Credit is a tax credit that businesses can receive for each worker they keep on the payroll. The Paycheck Protection Program, stemming from the Cares Act, is a loan program that businesses can use to cover payroll and other expenses.
The biggest difference between the two programs is that the Employee Retention Credit is only available to businesses that have been forced to close or reduce operations due to COVID-19, while the Paycheck Protection Program is available to all businesses.
As a result, the Employee Retention Credit is more targeted toward businesses that have been most affected by the pandemic. Another difference between the two programs is that the Employee Retention Credit can be used to offset payroll taxes, while the Paycheck Protection Program can only be used to cover actual payroll expenses. This makes the Employee Retention Credit more flexible and potentially more valuable for businesses.
Ultimately, both the Employee Retention Credit and the Paycheck Protection Program can be helpful for businesses trying to keep their workers during these difficult times.
