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The PPP or the Credit for Employer Federal Payroll Taxes?

From my posts, you know a lot about the PPP (Paycheck Protection Program) and the COVID paid leave requirement for retained employees.

But what about the Employee Retention Credit? What is it? How can it help?

There’s a lot to it all.

But in a nutshell……….:

  • If your business qualifies, you can get the Employee Retention Credit of up to $5000 per employee, but not if you take the PPP loan, and vice versa. And this ER credit is reduced by any credit for COVID paid leave, or

  • You can take the PPP loan, and make use of the COVID paid leave credits as well, but COVID paid leave payroll won’t count toward PPP loan forgiveness

Decision Summary:

  • Unemployment is still the best overall solution for employers and employees, generally. That leaves the COVID paid leave credit behind for the most part, and in that way it won’t be a factor to reduce other credits, nor affect the forgivable PPP loan.

  • Apply for the PPP loan with your bank. When it comes time to be funded, make a decision between that and the ERC, if the business qualifies.

  • Always apply for the EIDL SBA loan on their website to get the grant money included, up to $10,000. They just sent out today the first $ we know about. Their email states that businesses will get a $1000 grant per employee that was on payroll as of January 31, 2020 (Thanks SBA, for letting us know almost two weeks later!) – so hopefully that’s what you put on the short application.

  • Check your State website for additional programs offered. For example, for California businesses there are special programs for women and minority owned businesses, and for certain industries and programs. However, for the California Disaster Relief Loan Guarantee Program, there are only 3 small banks participating, and they are not taking new customers. Not a great help yet from that program that is supposed to take care of businesses that cannot get federal help.

  • Then, decide if it is in your best interests to pursue the EIDL SBA loan at 3.75% (2.75% for non-profits), which requires a full-on application. The SBA will email you how to proceed.

I may sound like a broken record, but again, your most important step is always to determine financially the best way to re-build your business toward profitable (or more profitable) with a budget and your best financial forecast based on what you know. Then regularly review that against what actually happened or is happening, and re-forecast and adjust based on experience and new information.

More detail to come about the Employee Retention Credit and how it works, as well as a summary reminder of your COVID paid leave requirements for retained employees, in our next email/post.

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