Are you struggling to restart your business?
Using some of the government’s CARES ACT of 2020 programs like the Employee Retention Tax Credit (ERTC) and the Paycheck Protection Program (PPP) may be the answer to your problems.
The ERTC and PPP both aim to extend financial relief to small businesses. President Biden encouraged business owners to take advantage of the programs, but not everyone knows how to maximize them.
Continue reading below for a guide to getting the most out of your ERTC and PPP loans.
Maximizing Your ERTC and PPP Loans
Getting the most out of your ERTC and PPP depends on different factors. There’s no one-size-fits-all ERTC and PPP strategy.
It is because industries applying for PPP and ERTC have varying circumstances. Still, some general techniques can work in most cases.
On your second-drawn loan, aim for 60% payroll costs to open up more wages for ERTC eligibility. The PPP rules say 60% of your loan proceeds should cover your payroll. For the remaining amount, you can use it on other eligible expenses.
These include your gas, internet bills, supplier costs, and electricity. Applying the 40% can help free up extra wages for ERTC.
Another strategy is to pick your desired covered period. It starts on the day you receive your PPP second draw and ends at least eight weeks later, but not beyond 24 weeks.
The move lets you separate the time frames for the ERTC and PPP. In turn, you can maximize the wages for the former.
Sometimes, combining the two programs can be tricky. If you don’t have enough knowledge to pull off a good strategy, seek help from a trusted financial advisor. They can formulate a solid strategy and explain complex items surrounding PPP aggregation rules.
Lastly, document everything regardless of your current task. Record the covered payroll and non-payroll costs for PPP. Do the same when claiming ERTC, applying for PPP forgiveness, or receiving PPP loans.
Important Changes to Consider
Both programs are part of the CARES Act of 2020, but the dynamics of PPP and ERC went through some crucial changes. For 2021, PPP borrowers now qualify for the ERTC. Applicants may also claim ERTC for wages paid during the first two quarters of the year.
The government also increased the eligible wage amount per employee to $10,000 per quarter. In 2020, the amount was $10,000 per employee per year. For the credit, the current amount is now 70% compared to 50% in 2020.
Interestingly, the PPP and ERC interaction does not allow double-dipping. You cannot claim a payroll expense as an ERTC wage while claiming it as a forgivable cost on your PPP application. You can only take a wage payment for either the ERTC or PPP forgiveness but not for both loans.
Check out ERC Today to secure an ERC and to check your business’ ERC eligibility.
Discover More Business Strategies Now
Maximizing ERTC and PPP allows you to bring your business back on its feet. You can make your cash flow more efficient and position your business for growth.
Do you need more tips? If so, read our other guides today.
