Can You Apply for an Employee Retention Credit After Receiving a Payment Protection Program Loan?

Employee Retention Credit

During the pandemic, employee retention became a widespread problem amongst businesses. Between 2020 and 2021, Congress passed legislation that assisted businesses during the financial downturn. Two of these benefits are the Payment Protection Program (PPP) and the Employee Retention Credit (ERC). 


Although the ERC ended in September 2021, there is still an opportunity to claim this tax credit, even if you have received the Paycheck Protection Program Loan in 2020. 

How Can You Combine the Payment Protection Program Loan and Employee Retention Credit? 

In its original introduction under the CARES Act, the ERC was not available for any eligible applicants who had already received the PPP Loan. However, after the enactment of the Consolidated Appropriations Act (CAA), applicants who had previously received the PPP Loan were now eligible for the ERC, provided they met all other eligibility requirements. 


The one distinction made when collecting both the ERC and the PPP Loan made by the federal government is that qualified wages through the ERC shall not apply to any benefits for which the employer elects to have in the PPP Loan. An ERC could not be claimed with wages that were paid with forgiven PPP Loans. 


The IRS further classified this clarification on the election procedure and its interaction with the PPP Loan. The guideline notes that an election will be deemed to have been made for any qualified wages reported as payroll costs on a PPP Loan forgiveness application. 


The amount of wages for which the employer is deemed to have made the election is the number of qualified wages included in the payroll costs reported on the PPP Loan forgiveness application up to (but not exceeding) the minimum amount of payroll costs, together with any other eligible expenses reported on the application, sufficient to support the amount of the PPP Loan that is forgiven.

Getting Help From a Tax Professional

In short, the PPP Loan does not disqualify you for receiving or retroactively applying for the ERC. These payroll tax laws have become increasingly complicated over the last few years with all the relief measures, amendments, and end dates. And they will likely continue to change over 2022. Talk to a tax professional to ensure you’re making the right steps in reporting and compliance. These matters can have a significant impact on your tax burden. Our tax professionals are here to help you maximize your benefits. To learn more about qualifications, contact one of our experts.

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