As a small business owner who received a PPP loan, you may be wondering if you’re eligible for the Employee Retention Tax Credit (ERTC), a refundable tax credit for those affected by COVID-19. While it’s possible to receive both, it’s important to note that wages used for PPP loan forgiveness cannot be used for the ERTC and vice versa. This means that careful consideration must be given to which program will benefit your business the most.
In this article we’ll answer the question, can you get the ERTC if you got PPP loans. We’ll also explore the intricacies of how PPP loans and the ERTC interact, what expenses can apply to the credit, and what documentation is necessary to prove eligibility. We’ll also discuss how retroactively claiming the ERTC is possible through filing an amended quarterly tax return using Form 941-X and how ERTC service providers can help with determining eligibility.
Additionally, we’ll highlight other funding options available to small businesses beyond just PPP loans or lines of credit. By understanding these details, you can make informed decisions about which programs are best suited for your unique business needs during this challenging time.
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PPP and ERTC Interaction
You may already know that small business owners who received a PPP loan can still qualify for the ERTC. However, it’s important to note that wages used for PPP loan forgiveness cannot be used for ERTC and vice versa. This means that if you’ve exhausted your PPP funds on payroll expenses, you won’t be able to claim those same wages for the ERTC.
But don’t worry, any wages not used for PPP can be applied to the ERC, including certain healthcare expenses. This means that if you have additional payroll costs or medical expenses outside of what was covered by your PPP loan, you may still qualify for the ERTC. It’s important to keep detailed records of all your payroll expenses and healthcare costs in order to prove eligibility.
If you believe you may qualify for the ERTC retroactively (for example, if your business suffered losses in 2020), you can file an amended quarterly tax return using Form 941-X. Alternatively, there are also service providers available who can help determine eligibility and assist with filing for the credit.
Qualifying for ERTC
To qualify for the ERTC, it’s important to understand that wages used for PPP loan forgiveness cannot be used for the credit and vice versa. This means that you can’t double-dip and claim both benefits on the same wages.
However, any qualified wages not used for PPP loan purposes are eligible for ERTC, including certain healthcare expenses.
To be considered an eligible employer for ERC, your business must have been either fully or partially suspended due to a COVID-19-related government shutdown order or experienced a significant decline in gross receipts. The threshold for significant decline varies depending on the quarter being evaluated but generally involves a 50% decrease in gross receipts compared to the same quarter in the prior year.
If you believe your small business meets these requirements, retroactive tax credits may be available through Form 941-X. However, it’s important to retain payroll records and other documentation to prove eligibility.
If you need help navigating the application process or determining if your business is eligible, consider reaching out to an ERTC service provider or consulting with an accounting expert like Erica Seppala.
Wages and Expenses Eligible
Qualified wages and certain healthcare expenses not used for PPP loan forgiveness can be applied towards the ERTC, a refundable tax credit for eligible small businesses affected by COVID-19. These qualified wages include those paid from March 13, 2020 through December 31, 2021.
Employers with less than 500 full-time employees who experienced a significant decline in gross receipts or were fully or partially suspended due to government orders are eligible.
The maximum amount of qualified wages per employee that can be used towards the ERTC is $10,000 in Q1 and Q2 of 2021 and $10,000 per quarter in Q3 and Q4 of 2021. Additionally, certain healthcare expenses such as amounts paid or incurred for group health plan coverage may also be eligible for the credit. These expenses can include both employer contributions and employee premiums.
It’s important to note that employers cannot use the same wages for both PPP loan forgiveness and ERTC purposes. However, any qualified wages not used towards PPP loan forgiveness can be applied towards the ERTC.
Business owners should retain payroll records and other documentation to prove their eligibility for the credit.
Looking to claim the ERTC retroactively? Filing an amended quarterly tax return using Form 941-X is the way to go. This form allows businesses to correct previously filed forms and claim any missed credits or refunds.
To claim the ERTC, employers will need to fill out Form 941-X for each quarter they are amending and attach a copy of their original Form 941 for that quarter. Before filing an amended return, it’s important to gather all necessary documentation, including payroll records and receipts for eligible expenses.
Documentation should include proof of eligibility based on a decline in gross receipts or full or partial suspension of operations due to COVID-19. Employers should also retain documentation showing how they calculated their credit amount. Businesses may want to consider seeking help from ERTC service providers when claiming retroactively.
These providers offer expertise in navigating the complex rules surrounding the ERTC and can ensure that businesses are maximizing their eligible credits. Additionally, these providers can assist with preparing and filing amended returns, which can be time-consuming and require specialized knowledge of tax law.
Gather all necessary documentation before filing, retain payroll records and other documents proving eligibility, and seek assistance from ERTC service providers. Be prepared for a potentially lengthy process and maximize your eligible credits by understanding the rules surrounding the ERTC.
Overall, claiming the ERC retroactively requires attention to detail and thorough recordkeeping. By following the proper procedures and seeking professional assistance if needed, businesses can maximize their available credits and potentially receive significant refunds. It’s important to act quickly as there is a limited window in which businesses can file amended returns for previous quarters.
ERC Service Providers
Consider seeking assistance from ERTC service providers to navigate the complex rules surrounding the credit and ensure that you maximize your eligible credits. These providers can help with determining eligibility, calculating the credit amount, and filing for retroactive claims. They may also provide guidance on how to best use wages and healthcare expenses to qualify for the credit.
One benefit of working with an ERTC service provider is their expertise in navigating changing regulations and requirements related to COVID-19 relief programs. As rules continue to evolve, these providers can stay up-to-date on changes that could impact a business’s eligibility for the credit. Additionally, they may be able to provide information on other funding options available beyond just the ERTC.
It’s important to note that not all ERTC service providers are created equal. Consider researching potential providers thoroughly and checking their credentials before committing to work with them.
ERTC Express offers expert analysis and several funding options. Another option is ERC Specialists / Linqqs, which offers bridge loans based on expected refunds regardless of whether ERC was filed with them.
Ultimately, finding a reputable provider can save time and resources while maximizing eligible credits.
Other Funding Options
Exploring various funding options beyond PPP loans and the ERTC can provide additional financial support for your small business during these challenging times. While these programs have helped many businesses stay afloat, there are other options available to consider.
Small business loans and lines of credit are popular choices that offer flexibility in terms of repayment and loan amounts. One option is to work with a lender who specializes in providing bridge loans based on expected tax refunds, regardless of whether you filed for the ERTC with them. ERC Specialists / Linqqs is one such provider that offers short-term financing solutions to help small businesses cover expenses while they wait for their refund to arrive. These loans typically have higher interest rates than traditional bank loans, but may be a good option if you need cash quickly.
Another avenue to explore is crowdfunding platforms like Kickstarter or GoFundMe. These sites allow you to raise funds from a large group of people by pitching your idea or project online. While this option may not be suitable for every business, it can be an effective way to generate buzz around your brand and attract new customers.
As a small business owner, it’s important to consider all available options when seeking financial support during difficult times. By exploring alternative funding sources like bridge loans or crowdfunding platforms, you can find the right solution that fits your specific needs and helps keep your business running smoothly. It’s always wise to consult with experts in the field like ERC Specialists / Linqqs before making any decisions about financing your company’s growth or expansion plans.
Make sure to keep all your payroll records and other documentation organized and easily accessible so that you can prove eligibility for the ERTC if you received it. This includes documenting employee wages, healthcare expenses, and any other relevant information related to COVID-19. Keeping accurate records is essential in proving eligibility for the credit, should you need to use it.
In addition to retaining payroll records, there are other types of documentation that may be necessary when claiming the ERTC. For example, businesses may need to provide evidence of a significant decline in gross receipts during certain quarters as compared to 2019. Other requirements may apply depending on your specific situation or industry.
By keeping detailed records and documentation throughout the year, you can avoid scrambling at tax time to gather all the necessary information for claiming the ERTC. It’s important to work with a qualified tax professional who can help ensure that everything is properly documented and filed on time.
The ERTC can provide much-needed relief for eligible small businesses impacted by COVID-19, so make sure you have everything in order well before tax season arrives.
Overall, it’s possible for small business owners who received a PPP loan to also qualify for the Employee Retention Tax Credit (ERTC). However, it’s important to keep in mind that wages used for PPP loan forgiveness cannot be used for the ERTC and vice versa.
Retroactively claiming the ERTC is possible by filing an amended quarterly tax return using Form 941-X, and there are ERTC service providers available to help with eligibility.
To qualify for the ERTC, businesses must meet certain criteria related to experiencing financial hardship due to COVID-19. Additionally, there are specific wages and expenses that can apply towards the credit. It’s important for business owners to retain documentation proving their eligibility in case of audit or future inquiries.
While navigating various funding options during these uncertain times can be overwhelming, it’s important for small business owners to explore all available avenues. In addition to PPP loans and the ERC, there are other funding options such as small business loans and lines of credit that may be beneficial.
By staying informed on eligibility requirements and retaining necessary documentation, small business owners can make informed decisions about which funding options best meet their needs.