Q&A: Employee Retention Credit

Q&A: Employee Retention Credit

These questions and answers are a compilation of the participant Q&A from YPTC and Network for Good’s webinar on Feb. 15, 2021.

What is the ERC link?

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-how-to-claim-the-employee-retention-credit-faqs

In applying for the PPP, we are only eligible to apply for 2.5 times our monthly payroll? Would it be possible to apply for the Employee retention credit on the other months of payroll?

Yes, there are ways to maximize both funding sources/opportunities by paying attention to the timing.

Do you have a resource that compiles the various Employer requirements and responsibilities, and related credits or provisions, around employees who must quarantine and miss work due to CDC requirements, etc.?

No, we don’t provide tax or human resources consulting.

If you received PPP money then you do not qualify for ERC, correct?

No, they amended it.  You CAN get ERC retroactively and PPP. You just have to make sure you are not “double-dipping” funds.

For revenue calculations, is the ERC looking for earned revenue only? For instance, are donations included in these calculations?

No, gross receipts will mirror those of PPP. Donations ARE included in the calculations.

If PPP covered 4 months, is this period reduced from the ERC period of say 9 months- Q2 to Q4?

Any payroll costs submitted as eligible costs for a PPP loan cannot also be used as qualified wages for the ERC.

What’s the guidance on ERC regarding employees who were employed for part of 2020, but then laid off due to reduced capacity/inability to reopen?

The guidance comes through the IRS website (input “employee retention credit” into the search bar).  Here is the guidance for determining the types of governmental orders that may be taken into account: https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-what-types-of-governmental-orders-may-be-taken-into-account-for-purposes-of-the-employee-retention-credit-faqs.

Should wages paid for by other grants be excluded from the calculation of eligible wages for the ERC calculation for both 2020 and 2021?

In general terms, yes. The IRS has not yet updated their website with clarifying guidance.  Currently, the IRS states that qualified wages for purposes of the ERC cannot include wages for which an FFCRA credit or a Work Opportunity Tax Credit were claimed, or that were submitted as eligible payroll costs on a Borrower’s PPP loan forgiveness application.

Do you have any suggestions for how to answer Parts 1 and 2 on the 941-X when filing for Q4 ERTC?

We cannot provide tax or legal advice so we would suggest asking your auditor or tax accountant.

Does the ERC include individual ownerships?

We specialize in nonprofits so we cannot answer tax questions about sole proprietors.  We recommend checking out FAQ #59 at https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-qualified-wages-faqs

We got a PPP early on, in April 2020 and paid out in 8 weeks by 6/15/2020. So those dates and payroll can’t be considered for ERC. BUT if 7/1/20-12/31/20 are lower by the necessary amounts we could apply for ERC for those wages, correct?

Yes, if you meet the qualifications for the ERC.

If eligible and apply, is the ERC a reimbursement (receive a check from the government) or a reduction in future payroll taxes?

The ERC works as a credit against current and future employment taxes due.  The credit is refundable, and any excess of taxes owed will be refundable.  If you are a small employer, you may be able to request an advance of the refund.

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