As the pandemic has hit the country, the government has passed certain credits and loans to ease the companies’ working. Out of them, the two most important are ERC Credit and PPP loans. But many of us are still unaware of it. 

Therefore, this blog will cover the frequently asked questions on ERC and PPP loan consulting. So, let’s start! 

PPP Loan Consulting FAQs 

Is it necessary for small company concerns (as defined in Section 3 of the Small Business Act, 15 USC 632) to have 500 or fewer workers qualified borrowers for First Draw PPP Loans?

The answer is no. Small company enterprises may be qualified borrowers for First Draw PPP. Loans are available even if they have more than 500 employees, as long as they meet the current requirements—section 3 of the Small Business Act, 15 USC 632. If a company fits the SBA’s needs of employee-based or revenue-based size criteria matching its core industry, it may qualify.

Is it necessary for lenders to make an independent assessment relating to applying affiliation rules under 13 CFR 121.301(f) to borrowers?
The crisp answer to this other PPP loan consulting question is no. The borrower must establish which entities (if any) are its affiliates and the borrower’s and its affiliates personnel headcount. Borrowers’ certificates may be relied on by lenders.
In the second PPP, how are full-time equivalent employees calculated? Do they use the average number of FTEs from that time if utilizing 2019 figures?

Use headcount rather than FTE. For the time, use the average.

Can a small firm qualify for a PPP loan if it had its first payroll in January 2021? They began operations on January 1, 2020.

No, it does not.

  • How should a forgiven PPP loan be categorized in QuickBooks to remove it from the balance sheet?

After the PPP loan is forgiven, create a new income account (PPP forgiveness on the income statement) and make an adjusting journal entry to shift the balance. This is a below-the-line item that is not included in revenue.

  • What are the loan conditions?

The interest rate on all PPP loans is fixed at 1%. PPP loans granted before June 5, 2020, have a two-year maturity period. Loans issued after June 5, 2020, have a five-year maturity. A first-time PPP loan has a maximum loan amount of $10 million, while a second-draw loan has a maximum loan size of $2 million. There is no necessity for a personal guarantee or collateral. Furthermore, neither the government nor the PPP lenders are permitted to charge small firms any fees for processing these loans.

ERC Credit Frequently Asked Questions (FAQ)

  • What is employees’ eligibility for the Employee Retention Credit?

Employers who experienced partial shutdowns due to government orders restricting commerce, travel, or group meetings or who experienced significant declines in quarterly gross receipts (compared to their quarterly gross receipts in 2019) as a result of the pandemic are eligible for this program.

  • What exactly are ERC qualifying wages?

ERC credit is determined based on qualifying salaries paid to employees when the employer is qualified. For most businesses that take advantage of this scheme, the refundable tax credits far outweigh the payroll taxes paid by the employers. ERC advantages may exceed the amount of PPP financing received by a firm.

  • Is the Employee Retention Credit just available to full-time workers?

The answer to this ERC credit question is no. An employer may include wages paid to part-time and full-time employees in the ERC calculation. The sole restriction on credit computation is that an employer may only compute credits on the first $10,000 of salaries and healthcare expenditures paid to each employee during each credit-generating month.

  • How long are the ERC eligibility and credit-generating periods?
Eligible employers can claim the ERC for qualifying salaries earned in 2020 and Q1, Q2, and Q3 of 2021.
  • Is it still possible to apply for the Employee Retention Credit?

Yes. The statute of limitations for the 2020 ERC does not expire until April 15, 2024. The statute of limitations for the 2021 ERCs does not expire until April 15, 2025.

  • Does meeting the Government Mandate Test automatically qualify me as an eligible employer for the full quarter?

Technically, yes, but you only pay qualifying salaries while the mandates exist and significantly impact the firm.

  • Do I include the ERC in my income when I receive it?

No. Instead, the employer must minimize salary deductions on their income tax return for the tax year in which they are an eligible employer for ERC reasons.

  • How can I apply for the ERC credit?

To apply for the ERC in the future, file an updated Form 941X (Quarterly Federal Payroll Tax Return) for the quarters in which the firm was a qualified employer.

  • How long does the IRS take to provide a refund following the submission of an updated Form 941X?

It takes around nine months to get a return from the IRS after submitting an updated Form 941X.

  • Can I apply for both the ERC credit and the PPP Loan?

Yes. While salaries supported by a PPP loan may not be included in the ERC computation, PPP funding only applies to eight to ten weeks of labour expenditures. ERC eligibility periods are extended. Non-wage costs can also be funded through PPP loans.

For ERC purposes, it is important to develop work papers that allocate the PPP funding across the 24-week Covered Period. PPP funding may be allocated to wages that would not generate any ERC (e.g., to owners of the company or wages over $10,000 in one of the four ERC credit-generating periods).

Now that you have gone through the frequently asked ERC credit and PPP loan consulting questions, it is time to claim it. But what if the paperwork still haunts you? Do not worry. You can visit the website of Claim Ccredit, as they can assist you in claiming process from start to end. So, why wait? Book your slot before someone else takes your seat.