Is an Employer Eligible to Receive an Employee Retention Credit after the Paycheck Protection Program (PPP) Loan is Forgiven?

The Employee Retention Credit (ERC) and the Paycheck Protection Program (PPP) were two of the most significant relief measures provided by the US government to help businesses affected by the COVID-19 pandemic. While many employers have taken advantage of both programs, there has been some confusion around whether an employer can receive the ERC after the PPP loan is forgiven. In this blog post, we will explore this question and provide some clarity around the eligibility requirements for the ERC.

First, it’s important to understand the purpose of the ERC and the PPP. The ERC is a refundable tax credit that provides financial relief to eligible employers who continue to pay their employees during the pandemic. The PPP, on the other hand, provides forgivable loans to eligible small businesses to help them keep their employees on the payroll.

Now, let’s address the question at hand. Yes, an employer is eligible to receive the ERC after the PPP loan is forgiven. In fact, the ERC was extended through December 31, 2021, and expanded to cover more eligible employers. This means that even if an employer received a PPP loan and had it forgiven, they may still be eligible to claim the ERC for wages paid after the PPP loan was forgiven.

However, there are some important things to keep in mind when it comes to claiming the ERC after the PPP loan is forgiven. First, the ERC cannot be claimed for the same wages used to support the forgiveness of the PPP loan. This means that employers cannot “double-dip” and claim both the ERC and PPP loan forgiveness for the same wages.

Second, employers can only claim the ERC for wages that were not paid for with funds from a PPP loan. This means that if an employer used PPP loan funds to pay employee wages during the covered period, they cannot claim the ERC for those wages.

In addition, the amount of the ERC may be reduced if the employer received a PPP loan. The amount of the PPP loan forgiveness is taken into account when calculating the ERC, which means that the amount of the ERC may be reduced if the employer received a PPP loan.

In conclusion, an employer is eligible to receive the Employee Retention Credit after the Paycheck Protection Program loan is forgiven. However, there are limitations and eligibility requirements to keep in mind. Employers should consult with a tax professional or advisor to determine their eligibility for the ERC and ensure that they are properly calculating and claiming the credit.