PPP Loans and the ERTC
As an addition to my previous blog, I want to expand upon the details of the second PPP Draw and introduce another potentially huge benefit to your company, the Employee Retention Tax Credit (ERTC). In 2020, you were only able to claim the PPP or the ERTC, not both. In 2021, you can potentially capitalize on both of these provisions. Let's take a look at each further below and see how they relate to each other.
PPP Draw 2
We are beginning to see applications become available for the second PPP loan. If you require assistance with this application and the future forgiveness application, please let me know. Also, if you did not receive round one of the PPP due to taking the ERTC, collecting unemployment, or just did not apply, you can apply for a round one draw. The second PPP amount will be two and a half months of average monthly payroll except for restaurants who are eligible for three and a half months. We will be trying to do most applications through US Bank online as we had great success with them for the first round of PPP loans. The US Bank application is set to open on January 19th. Below, I have listed the main requirements to qualify for the second PPP. Keep in mind, that if you did not take draw one, you do not need to meet the draw 2 requirements.
Must have at least a 25% decline in gross receipts from any one quarter in 2019 to the same quarter in 2020
Must have fewer than 300 employees
Must have used the full amount of the first PPP loan received, if any
Must have had qualifying payroll costs in either 2019 or 2020
Employee Retention Tax Credit
The ERTC flew under the radar in 2020, mainly because you were not able to claim both the ERTC and the PPP. However, that is not the case in 2021. The ERTC has been made way more attractive by both making it easier to qualify for and increasing the amount of the credit. The ERTC is a payroll tax credit of 70% of qualifying wages paid to non-owner employees of up to $10,000 in wages. Essentially, it is up to a $7,000 payroll tax credit per employee for both the first and second quarters of 2021. This credit is a dollar-for-dollar reduction in your payroll tax liability and claimed on Form 941. Please contact your payroll provider for help applying this credit. These are the main requirements for being eligible for the ERTC:
Must have a 20% reduction in gross receipts from your current quarter (Q1 2021 or Q2 2021) to the same quarter in 2019 OR have a full or partial suspension of the operation of your business due to COVID-19
You cannot use the same payroll costs used to be eligible for PPP forgiveness that you use to claim the ERTC (i.e. no double dipping). This will require special attention to ensure you have enough payroll costs to claim both benefits.
