Eligible employers who have received PPP loans can be able to claim ERTC. Under the CARES Act, employers were prohibited from claiming the ERTC when the employer also received a PPP loan. The removal of this prohibition is made retroactive to the date of enactment under the CARES Act. That means employers may now have potential ERTC benefits that did not exist previously.
There is an imposition by the Act, enacted to limit the scope of the retroactive benefit. The Act imposed a special provision that disqualifies an employer in claiming the ERTC on the same wages used to confirm PPP loan forgiveness. An employer chooses to apply wages toward PPP loan forgiveness by making an election not to claim the ERTC.
An employer may not qualify for PPP loan forgiveness; in this case, all of the wages are potentially available for the ERTC. Also, an employer may have incurred more wages than were needed to substantiate PPP loan forgiveness, in which case these “excess” 2020 wages are now available for the ERTC.
The Act provides special rules that employers may use to claim retroactive ERTC benefits. In recognition that payroll tax returns have already been filed for the first three quarters of 2020, the Act permits an employer an election to treat the retroactive ERTC benefits as incurred during the fourth quarter of 2020. For this purpose, the retroactive benefits are based on eligible wages paid after December 31st, 2019, and before October 1st, 2020. Again, the IRS will eventually establish these election procedures, but this election should prevent the need to amend previous payroll tax returns to claim the retroactive ERTC benefits.
The retroactive and new changes to the ERTC have significantly increased its relevance to businesses affected by the coronavirus pandemic.
We are actively helping businesses determine the max amount they can qualify for based on their unique business situation for all available quarters.
Contact us now to set a no-cost consultation.
The IRS also has a webpage dedicated to the operation of the ERTC with examples of qualifying situations.