Which One is Better?
Employers who kept their workers during the COVID-19 pandemic can get a tax credit that can be refunded. This credit is called the Employee Retention Credit.
The credit is equal to 50% of the wages paid to workers who apply, up to a maximum of $10,000 per worker. The credit can be used on wages given from March 13, 2020, until the new expiration date in December 2021.
To be eligible for the credit, an employer must have shut down all or part of its operations because of a government order linked to COVID-19 or seen a big drop in its gross receipts.
The PPP is a loan program for small businesses and some not-for-profit organizations. Loans can be taken out for up to 2.5 times what the average monthly payroll costs are for the company. The most that can be borrowed is $10 million. Loans have flexible terms for paying them back, and they may be forgiven if they are used for certain qualifying costs.
Tip: Here’s a quick quiz to see if you prequalify for the ERTC today!
For a business to qualify for the PPP and PPP loan forgiveness, it must have fewer than 500 workers and have had less business because of the COVID-19 pandemic. Businesses that can get the credit for keeping employees do not qualify for the PPP.
What PPP and ERC mean for business owners
The PPP and the Employee Retention Credit are two important tools that business owners can use to get through the pandemic. The PPP helps small businesses get the money they need, and the Employee Retention Tax Credit helps them keep their workers on the payroll.
Together, these two services have helped many businesses stay open during these tough times. Even though the future is still unclear, the PPP and Employee Retention Credit have been very helpful to businesses so far in getting through the pandemic.
What is the Payroll Protection Program?
During the COVID-19 pandemic, the Payroll Protection Program is a loan program that helps small companies keep their workers on the job. The Small Business Administration (SBA) runs the program, which gives loans of up to $10 million to small companies that are having trouble making money because of the pandemic.
The loans can be used to pay for things like rent, bills, and salaries. If the business uses the money to keep or hire workers, the loans will be forgiven. The Payroll Protection Program has been a huge success, helping millions of small businesses across the country keep their workers on the job.
What is the Employee Retention Credit?
During the COVID-19 outbreak, the Employee Retention Credit is a tax credit that is meant to encourage businesses to keep their workers on the payroll. Businesses of all kinds, including sole proprietorships, partnerships, and corporations, can use the credit.
To be eligible, companies must have either stopped operating completely or partially because of the COVID-19 pandemic or seen a big drop in their gross sales.
The credit is worth up to 50% of the pay paid to workers who qualify, up to a maximum of $5,000 per worker. The credit can be used for pay paid by a business after March 12, 2020, and before January 1, 2021.
Visit the IRS website or SnackNation’s Guide to ERC Frequently Asked Questions to learn more about the Employee Retention Credit.
What are the major differences between the ERC and PPP?
The Employee Retention Credit (ERC) is a tax credit that can be refunded to companies who keep their workers during the coronavirus pandemic. Employers who lose money because of the pandemic and keep their workers’ wages at the same level as before the pandemic are eligible for the credit.
The Paycheck Protection Program (PPP), on the other hand, is a loan program that gives small businesses money to help them pay their employees and cover other costs. Businesses of all kinds can use the PPP, and loans can be forgiven if certain conditions are met.
So, the PPP can help businesses that are having trouble keeping their workers by giving them the money they need. But it’s important to remember that the ERC and the PPP are not the same thing. Each has its own set of rules for who can join and what rewards they offer.
➜ Funding Differences: ERC vs PPP
Both of these programs can help people get the money they need, but there are some big differences between them. The PPP is a loan scheme that helps small businesses pay their workers by giving them money. On the other hand, the ERC is a tax credit that companies can get for wages given to eligible employees during the pandemic.
How they are paid for is the biggest difference between the two. Even if the borrower finally becomes eligible for forgiveness, PPP loans must be paid back with interest. On the other hand, ERCs do not need to be paid back. Another big difference is that businesses of all sizes can get PPP loans, but only businesses with less than 500 workers can get ERC loans.
Lastly, PPP loans can be used for a wide range of costs, such as rent, utilities, and wages. ERCs can only be used to pay wages to people who work for you.
➜ Ranges of Awards
PPP
One of the most important things you need to do to be eligible for the Paycheck Protection Program (PPP) is to make no more than $100,000 a year. This means that you can only put $100,000 on your application if you or any of your workers make more than $100,000. But you can include things like health insurance, payments to a retirement plan, paid sick leave, vacation pay, and severance pay.
Your salary costs for 2019 or 2020 and either your net profit (for loans approved before March 3, 2021) or gross profit (for loans approved after March 3, 2021) will be used to figure out these costs.
During the COVID-19 pandemic, the PPP has been a very important program that has helped many companies stay open. By making sure that companies have the money they need to keep paying their employees, the PPP has helped to stop a lot of people from losing their jobs and the economy from falling apart.
ERC
Here are some ranges of awards we’ve seen being granted by the IRS over the past year or so:
# of Employees ERC Award (Low) ERC Award (High)
5 $25,000 $130,000
10 $50,000 $260,000
15 $75,000 $390,000
20 $100,000 $520,000
25 $125,000 $650,000
30 $150,000 $780,000
40 $200,000 $1,040,000
50 $250,000 $1,300,000
75 $375,000 $1,950,000
100 $500,000 $2,600,000
150 $750,000 $3,900,000
200 $1,000,000 $5,200,000
300 $1,500,000 $7,800,000
400 $2,000,000 $10,400,000
500 $2,500,000 $13,000,000
*Important Note: This table serves as a broad estimate. This is not a guarantee. Every business is different. Speak to an ERC Expert to fully understand your qualification status and to calculate how much your award might be.
➜ ERC Refund Processing Time
The ERC is claimed on an employer’s quarterly Form 941. The credit is refundable, which means that if the credit is more than the employer’s tax bill, the employer can get a refund. The IRS has said that it will handle ERC claims “as quickly as possible,” but it’s not clear how long that will take. Employers should be able to get their tax payments within a few weeks of filing their returns if they have the right paperwork. There are many ERC cases of companies getting their refunds in less than a month, but you should know that it could take longer.
Can you qualify for both the ERC and PPP?
Maybe is the answer. Even though both the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) are meant to help businesses during the COVID-19 outbreak, there are some key differences between the two.
The PPP provides loans that can be forgiven if the proceeds are used for eligible expenses, such as payroll costs or rent.
On the other hand, the ERC gives businesses a tax credit if they keep their workers. So, it is possible to qualify for both programs. However, before applying, it is important to understand the eligibility standards and how the two programs work to avoid ERC scams.
Is the PPP still available in 2023?
After May 31, 2021, you can no longer use the PPP. But it is possible that the PPP could be extended again or that a similar program could be made in the future. If you run a small business or a nonprofit, it’s important to know what’s going on with the PPP and other financial aid programs. You can also check to see if you qualify for an ERTC-backed loan. Business owners may be able to get an advance on their ERTC in exchange for paying interest on their loan while they wait for the IRS to accept their claim.
How to see if you prequalify for the ERC
Also eligible are businesses that had to shut down because the government told them to. Businesses must file Form 941, Employer’s Quarterly Federal Tax Return, in order to get the credit. We would also suggest getting in touch with an ERTC service to see if your claim is even valid.
For more information on the Employee Retention Credit, please visit the IRS website.