Stimulus Bill Allows $5k per Employee Retention Tax Credit Even If You Got The PPP

One provision apparently included in the Stimulus Package that hasn’t gotten much press is that practices would be able to claim the Employee Retention Tax Credit (ERTC) of up to $5k per employee even if the practice received a PPP Loan. The payroll tax credit is equal to 50% of the first $10k of wages paid to each employee.  Wages paid with PPP funds or other subsidies wouldn’t count toward this valuable credit. Currently businesses that received the PPP Loan aren’t eligible for the ERTC.

According to the IRS at: https://www.irs.gov/coronavirus/employee-retention-credit, to be eligible for the ERTC:

Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:

1. the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
2. a significant decline in gross receipts. A significant decline in gross receipts begins:
   1. on the first day of the first calendar quarter of 2020
   2. for which an employer’s gross receipts are less than 50% of its gross receipts
   3. for the same calendar quarter in 2019.

The significant decline in gross receipts ends:

• on the first day of the first calendar quarter following the calendar quarter
• in which gross receipts are more than of 80% of its gross receipts
• for the same calendar quarter in 2019.

The credit applies to qualified wages (including certain health plan expenses) paid during this period or any calendar quarter in which operations were suspended.

Now that this business-friendly revision to the ERTC has been enacted into law, please work with your payroll service to apply for this payroll tax credit.

One final thought. Since this ERTC appears to now be available to recipients of the PPP Loan, please claim as much as you can in allowable facility and other non-payroll costs when applying for your PPP loan forgiveness to maximize the wages available for this valuable $5k per employee payroll tax credit.

We’ll keep you posted on this tax break once the rules are written.