December 29, 2020 PPP Loan and Employee Retention Credit: Your top 5 questions answered
Accountalent is breaking down the latest stimulus bill – specifically the PPP Loan and Employee Retention Credit – into easy-to-digest answers… instead of making you read the full 5,600-page bill. Here are some FAQs we’ve received since Congress passed the latest stimulus bill.
1. Is it too late to apply for a PPP loan?
No! There is now PPP2. The forgivable loan amount is the same formula as PPP1 –2.5X your average monthly payroll. To be eligible, though, you need a 25% reduction in revenue in any 2020 quarter compared to the same 2019 quarter.
2. Is it too late to claim the 2020 Employee Retention Credit (ERC)?
No! The new stimulus bill allows businesses to retroactively claim an ERC for 2020. You’ll also need to show a reduction in revenue similar to the PPP requirement above. This can be worth up to $5K per employee.
3. Is there a new ERC for 2021?
Yes, and this one is even better than the one above… and you can get both of them! It can be worth up to $14K per employee, based on Q1 2021 and Q2 2021 payroll.
4. Can I claim the ERC if I already received a PPP loan?
Yes! The new stimulus bill now allows businesses that previously borrowed a PPP loan to go back and claim the ERC for 2020 and apply for the one for 2021. However, no “double dipping” on payroll – you cannot use payroll for PPP forgiveness and in the calculation of the ERC. Considering most PPP loans only covered a limited amount of payroll, there is a good chance you may qualify for the ERC as well.
5. Are my payroll expenses deductible on my tax return if my PPP loan is forgiven?
Yes! Previously under the CARES Act, you could not take a deduction for payroll expenses covered by a forgiven PPP loan. However, under the new stimulus bill, those expenses are now deductible.
There are many moving parts to the PPP Loan and Employee Retention Credit and how they interact, so be sure to reach out to Accountalent before making any final decisions. Our team can help you navigate these complex requirements so your startup doesn’t leave any money on the table.