We get this question a lot from business owners. "What is the difference between ERC and PPP?" It's important to know the difference in regards to qualifying and using the money.
The ERC is a tax credit designed to help businesses keep their employees on payroll. It is available to businesses that experienced a significant decline in gross receipts or were forced to partially or fully suspend operations due to government orders related to COVID-19. The credit is worth up to $26,000 per employee and can be claimed on quarterly tax filings.
On the other hand, the PPP is a loan program designed to help businesses cover their payroll and other expenses. The loan amount is based on the business's payroll costs and can be forgiven if the business meets certain requirements, such as using the funds for eligible expenses and maintaining employees on the payroll.
One of the main differences between the two programs is that the ERC is a tax credit, while the PPP is a loan. This means that the ERC does not need to be paid back, while the PPP does. However, if a business meets the requirements for PPP loan forgiveness, the loan can essentially be turned into a grant, meaning the business does not have to repay it.
Another key difference is that the ERC is retroactive, meaning that eligible businesses can claim the credit for qualified wages paid as far back as March 2020. In contrast, the PPP has a set covered period during which the loan funds must be used.
Additionally, while both programs are available to businesses with fewer than 500 employees, the ERC has fewer restrictions on who can qualify and how the money can be spent.