by John Edwards and quotes from Rick White Former U.S. Congressman & CEO of Technet
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Along with PPP, the most critical stimulus relief provided by the government was the Employee Retention Credit (ERC) which can deliver seven-figure cash refunds to business owners. Now both can be claimed together.
Previously, businesses that received PPP could not also claim ERC. Congress realized the potential of the ERC to lift the economy and removed the barrier between the two incentives with the Consolidated Appropriations Act of 2021.
How to claim ERC and PPP
If you have already claimed a PPP loan, you can still qualify for ERC as long as you meet either of the criteria below:
- Had an impact on your business due to COVID
The first path of qualification is if your business was “fully or partially” suspended in 2020 or 2021 due to government mandates during the pandemic. This means if you had to adjust your operations or your business was impacted, you can qualify. Here are some examples of impacts that qualify:
- Inability to attend trade shows in-person;
- Inability to attend trade shows in-person;
- Supply chain issues;
- Closing down a department or location while other units continued operation;
- Employees not being able to work on-site;
- Capacity restrictions; and
- Minimized hours of operation.
- Decrease in gross receipts
You can also qualify if your gross receipts declined in 2020 or 2021 compared to your revenue in 2019. The gross receipt test differs for 2020 and 2021. For 2020, you had to have had a decline of 50% or more relative to 2019. For 2021, you had to have had a decline of at least 20% relative to 2019 to qualify.
Real-world example
We recently worked with a home care agency that had received both rounds of PPP. Due to COVID-related federal restrictions in 2020, the agency was unable to market at facilities, and facility restrictions also decreased the number of clients caregivers could visit in a day.
The business, despite these issues, was able to remain profitable and had no decline in revenue. But, because they had claimed PPP and remained profitable, they thought they could not qualify for ERC.
Fortunately, they connected with alliantgroup, and we were able to explain how legislative changes now allowed them to claim both ERC and PPP. Our technical experts secured a substantial refund of $2.8M for the agency. This came as a huge boost, and they could use the funds to hire more employees and reinvest in the business.
Conclusion
The credits can bring millions of dollars to businesses to hire and retain workers and reinvest in themselves.
Every organization that has had to change operations due to the pandemic should consider claiming ERC even if they took PPP. There is a lot of confusion around the credit, but the federal government wants businesses to take full advantage of it to bolster the economy.
Have doubts regarding the upcoming tax season?
alliantgroup can help! We are the leading industry experts with 20+ years of experience helping our clients and CPA firms to understand and claim eligible incentives before it is too late!
Estimate the refund your business can claim: Employee Retention Credit | Estimate & Claim your ERC credit (alliantgroup.com)
About the Author
Rick White represented the First District of Washington State as Congressman, White became well known as one of Congress’s most active legislators on high tech issues. After serving in Congress, White transitioned to international law firm, Perkins Coie, where he worked in the firm’s Electronic Commerce and Internet Law practice section. He also served as the CEO of TechNet from 2001 to 2005 where he advocated for technology companies, then moved on to serve as founder and CEO of several tech-oriented startup companies. He is currently principal at the Woodbay Group, a consulting and investment firm in Seattle.
