2/12/2024 0 Comments Ppp gross receiptsTo address this issue, Notice 2021-20 provides that an eligible employer is deemed to have made the election under section 2301(g)(1) of the CARES Act for the amount 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. As a result, borrowers generally did not include an ERC qualified wage election on their originally filed 2020 employment tax returns. When these borrowers filed 2020 Q2 and Q3 federal employment tax returns, they were not eligible for the ERC and, at the time the 2020 Q4 return was filed, they had very little information on how to claim the credit. This process works differently for PPP loan borrowers that have already filed a forgiveness application for a 2020 PPP loan. It is important to note that total loan forgiveness can be achieved with payroll costs that equal only 60% of the PPP loan as long as there are eligible non-payroll costs paid during the covered period to cover 40% of the loan. If, however, the ERC maximum qualified wage is not reached with respect to wages paid outside the PPP loan covered period, additional analysis is needed to determine whether wages paid during the PPP loan covered period can be designated as ERC wages without affecting total loan forgiveness. If the maximum qualified wage amount is paid or projected to be paid outside the PPP loan covered period, then the analysis is complete for that employee and all wages paid to that employee during the covered period can be used for PPP loan forgiveness. The determination of the ERC wage amount for each quarterly return begins with an employee-by-employee analysis of qualified wages paid during each quarter before and after the PPP loan covered period. ERC qualified wages are limited to $10,000 for calendar year 2020 and $10,000 for each of Q1 and Q2 of 2021 (note that the American Rescue Plan Act of 2021 (ARP), which was signed into law on March 11, 2021, extends the ERC through December 31, 2021). The general rule is fairly easy to apply for PPP borrowers who have not yet applied to have a PPP loan forgiven, because they can make the election on an original or amended federal employment tax return (typically a Form 941). IRS Notice 2021-20, issued on March 1, 2021, provides guidance for employers claiming the ERC and indicates that an eligible employer generally makes the election to use payroll costs for PPP loan forgiveness by not claiming the ERC for those qualified wages on its federal employment tax return. Section 2301(g)(1) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended by the Tax Certainty and Disaster Tax Relief Act of 2020 (Relief Act), allows recipients of PPP loans to also claim the ERC for qualified wages as long as the same expenses are not used for both benefits. How can I maximize the employee retention credit while still achieving full PPP loan forgiveness? Not only does the guidance continue to change but some of the provisions have retroactive application, such as the availability of 2020 employee retention credits (ERCs) for borrowers of PPP loans. The Paycheck Protection Program (PPP) loan process has become increasingly complicated as new guidance and enhancements to the program have been announced.
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