The COVID-19 pandemic has wreaked havoc on businesses across the nation, causing countless layoffs and closures. However, amidst the chaos, two government programs have provided a much-needed lifeline for businesses struggling to survive – the employee retention credit (ERC) and the Paycheck Protection Program (PPP).
The employee retention credit was created as part of the CARES Act in March 2020 and was designed to encourage businesses to retain their employees during the economic downturn caused by the pandemic. The credit provides a refundable tax credit for eligible employers who keep their employees on the payroll, even if they are not working. Initially, the ERC was only available to businesses that did not receive a loan through the PPP. However, with the passing of the Consolidated Appropriations Act in December 2020 and the American Rescue Plan Act in March 2021, the ERC was expanded to allow businesses to claim the credit even if they received a PPP loan.
The PPP, on the other hand, was created to provide small businesses with funds to cover payroll costs, rent, mortgage interest, and utilities. The program has gone through several rounds of funding and has helped millions of businesses stay afloat during the pandemic. The most recent round of PPP funding, which was part of the American Rescue Plan Act, included several updates that made it easier for small businesses to qualify and receive funds.
The combination of the ERC and PPP has been a powerful tool for businesses facing financial strain. By using both programs, businesses have been able to keep their employees on the payroll and cover other essential expenses, such as rent and utilities. This has been particularly beneficial for businesses in industries that have been hit hardest by the pandemic, such as hospitality, retail, and entertainment.
One of the key benefits of the ERC and PPP is that they provide businesses with much-needed flexibility. The ERC allows businesses to claim a tax credit for up to $7,000 per employee per quarter, while the PPP provides forgivable loans that can be used to cover a wide range of expenses. This means that businesses can use the funds from the PPP to cover immediate expenses, such as payroll and rent, while also taking advantage of the tax credits provided by the ERC to further offset their costs.
Furthermore, the ERC and PPP have helped businesses avoid having to make difficult decisions, such as layoffs and closures. By providing financial support, these programs have allowed businesses to retain their employees and continue operating, even in the face of significant challenges.
As the country continues to grapple with the effects of the pandemic, the ERC and PPP remain critical lifelines for businesses. The recent extension of the ERC through the end of 2021 and the expansion of the PPP to include more businesses and non-profit organizations have further strengthened these programs. For businesses struggling to survive, the power duo of the ERC and PPP has been a lifeline that has provided much-needed relief and support during these uncertain times.