ERC
- The Employee Retention Credit is a tax credit given in the form of a check by the IRS that does not need to be paid back.
- Due to the IRS backlog, receiving ERC funds can take 20 weeks minimum.
- There is no cost for ERC because it is a deduction you take on your quarterly tax return. However, if you use a tax filing service, fees may be associated.
- ERC funding is still available, while PPP ended in May 2021.
PPP
- The PPP was a forgivable business loan, that if used correctly, such as to fund payroll or pay rent, did not need to be repaid.
- Funds were directly deposited into a bank account, usually within a week of loan approval.
- There was no upfront cost for the PPP. Cost was only incurred if the loan wasn’t spent according to the loan term.
What Are CARES Act, ERC and PPP?
The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is a bill that was passed in response to the economic fallout of the COVID-19 pandemic in the United States. Employee Retention Credit (ERC) and Paycheck Protection Program (PPP) are two programs that fall under this Act.
ERC is a fully refundable business tax credit for small and medium-sized businesses that paid payroll taxes in 2020 and Q1-Q3 of 2021 (recovery startups potentially eligible for Q3 & Q4 2021) which was implemented to encourage and reward business owners who retained employees during the pandemic.
PPP was implemented by the Small Business Administration with support from the Department of the Treasury to provide small businesses with funds to pay up to 8 weeks of payroll costs including benefits.
Regardless of whether your business has a PPP loan or not, we can help you claim your ERC.