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Interaction Between PPP Loans and Employee Retention Credit

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Rödl & Partner Tax Matters Volume 2021-4, published March 23, 2021


As mentioned in Rödl Tax Matters Volume 2021-2, the Employee Retention Credit was significantly expanded and extended through the first two quarters of 2021 under the Consolidated Appropriations Act (CAA) signed into law on December 27, 2020.  Further, the Employee Retention Credit was extended again through the end of 2021 via the American Rescue Plan Act. On March 1, 2021, the IRS released Notice 2021-20 in response to several questions raised by practitioners with regard to the interaction of PPP loans and the Employee Retention Credit. These questions arose due to the passage of the CAA which allowed companies receiving PPP loans to also claim Employee Retention Credits. Previously, companies that received PPP loans were not permitted to claim these credits.

The guidance outlined in Notice 2021-20 is complex and indicates that companies eligible for both PPP loans and Employee Retention Credits should review their options carefully. While companies are not permitted to double-dip on wages both for PPP loan forgiveness and Employee Retention Credits, there can be advantages to analyzing which costs to include on a PPP forgiveness application versus payroll costs on which to claim a credit. If your company is eligible for benefits under both programs, we recommend reaching out to your tax advisor for assistance in completing your PPP forgiveness application and claiming Employee Retention Credits in order to maximize the benefits available. In addition, consideration should be given to whether 2020 payroll tax returns may be amended to claim employee retention credits even if an employer received a PPP loan.

If you have any questions, please contact your Rödl & Partner representative.


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