Under the original CARES Act an employer could not receive both a PPP loan and an Employee Retention Tax Credit (ERTC, up to $5,000 per employee). Congress changed that so that you can obtain both.
Up to $10,000 wages (including certain health plan costs) for each employee can be counted to determine the amount of the ERTC credit. This credit can apply to wages paid after March 12, 2020. Employers can access this credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due To COVID-19.
If you suffered a “significant” drop in gross receipts for any 2020 quarter for 1st or 2nd 2021 quarter compared to the same 2019 quarter, you may now qualify for both a PPP loan and ERTC (you cannot use forgiven payroll expenses to obtain an ERTC). Eligibility requires a quarter by quarter comparison. Employers are eligible for the credit if either:
- Business operations were completely or partly suspended during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- a significant decline in gross receipts.
A significant decline in gross receipts begins on the first day of the first 2020 calendar quarter in which an employer’s gross receipts are less than 50% of the employer’s gross receipts for the same 2019 calendar quarter, or for 2021 1st and 2nd quarters only gross receipts are less than 80% of the same 2019 quarter.
The significant decline ends on the first day of the first calendar quarter following the calendar quarter in which gross receipts are more than of 80% of its gross receipts for the same 2019 calendar quarter.