One of the most common misconceptions concerning the Employee Retention Credit (ERC) is that if you received a Paycheck Protection Loan (PPP), you are not eligible for the ERC. This is far from the truth. PPP loan recipients are still potentially eligible for the ERC. The only difference for PPP loan recipients and non-recipients is that you can not double-dip on wages that were funded with PPP monies. Having said that, so as long as your enterprise is eligible, taking the ERC is a no-brainer. Remember, this is a refund on payroll taxes that you already paid to the Federal Government, plus any surplus in credit that is calculated. Every dollar that is calculated is money rightfully owed to the enterprise.
Another common misconception is that in order to qualify, an enterprise must experience both a reduction in gross receipts, AND suffered from a partial disruption due to state mandates. This is another case that is far from the reality of the situation. Eligible employers for purposes of the Employee Retention Credit are employers that were in business during calendar year 2020, including tax-exempt organizations, that either:
- a full or partial disruption of their operation during any calendar quarter due to governmental orders that limited capacity, commerce, travel, of group meetings due to COVID-19, or
- a significant decline in gross receipts
More information regarding the definition of a significant decline in gross receipts can be found here.
ERT Credit has had a wave of interested parties reach out concerning the ERC and many noted that their CPA told them they do not qualify for the credit. Often, for the two common misconceptions highlighted above. One particular enterprise ended up engaging ERT Credit after it was confirmed that they do in fact qualify for the credit. After having a meeting with leadership at the enterprise and their CPA, it was established that the PPP loans that they received in 2020 and 2021 did not disqualify them from obtaining the ERC. Moreover, the enterprise either had to establish it was partially suspended in terms of operations or suffered from a significant decline in gross receipts during a particular calendar quarter that subsequently made them eligible. When all was said and done, the enterprise qualified based on the gross receipt test for all eligible quarters in 2020 and 2021. Upon final calculation, their total retention tax credit came to $942,205. This is nearly a 7-figure tax credit that was almost left on the table had the enterprise not have reached out to ERT Credit.
ERT Credit has calculated the ERC credit for hundreds of employers across the country and continues to actively process both computations and amended returns for employers. Click here to reach out to us for more information.
