Employee Retention Credit and PPP

1/9/2021 3:31 PM

The recent Coronavirus stimulus bill (overview here) signed on December 27, 2020, made a significant change that could affect you in a good way. The Employee Retention Credit (ERC) was a credit enacted in the early stimulus bills in Spring 2020. But under the original rules, it was off-limits to anyone that took a PPP loan. For that reason, it was rarely discussed since most dentists were not eligible to claim it.  

The new bill removed this prohibition. You will not all qualify for this credit. And for some of you that do qualify, it will not be significant enough to fool with. But for some of you, it could be major and it should be investigated.

What are the requirements to qualify for the Employee Retention Credit?

  • The full or partial suspension of operations due to a government order OR
  • A 50% or more decrease in gross receipts for a quarter in 2020 compared to the same calendar quarter in 2019.

Based on the statistics we have seen, some of you will qualify under the revenue reduction. And if you do, great! You don’t need to worry about the government shut-down issue. But we believe many others will qualify under the partial suspension of operations due to a government order. It probably seems obvious to you that you would.  But trust me. There is rarely anything obvious about these laws. Please allow us time to complete the research.  

We are working to provide you more details of the Employee Retention Credit (ERC). But until we can, we want to issue this warning: If you think you might qualify for the ERC, hold off on filing for forgiveness for your PPP1 Loan. This is especially true if you don’t qualify to use the new Simplified Forgiveness application. Why? Because you will need to strategize to maximize your ERC and still achieve full PPP forgiveness. That strategy could affect the documentation submitted with your PPP forgiveness application. It will affect the calculation of the ERC credit and an incorrect strategy will reduce your ERC.

There is no rush to file for PPP forgiveness yet.  So let patience be your motto a bit longer.  If you’re craving more information, our ADCPA affiliate in Boston has a great webinar on their preliminary ERC thoughts.