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  • Laura Isenberg

PPP and ERC a Balancing Act

Updated: Sep 19, 2021

There are many different grants, loans and tax credits that have come about due to the Covid-19 pandemic and the related hardships over the past year and a half. Two of the most popular forms of relief are the PPP loans and the ERC tax credit. Many companies who have received a PPP loan may not realize that they can also qualify for Employee Retention Credits (ERC). In order to maximize relief it is a tricky balancing act to receive your complete PPP loan forgiveness and the maximum ERC credit available to you.


The PPP loan forgiveness and the ERC credits both use payroll in their calculations. You can NOT use the same payroll period for the loan forgiveness and the credit calculations. So, making sure you look at both the credit and the forgiveness together is key to maximizing your relief. If you apply for loan forgiveness before seeing if you are eligible for the ERC credits you may miss out on substantial relief.


PPP loan forgiveness requires you to use 60% of your loan for payroll costs and the other 40% of your loan can be used on non-payroll costs such as utilities, rent, mortgage interest etc. The payroll costs can be calculated over an 8-24 week period after the receipt of your loan. Payroll costs include gross wages, employer paid health insurance (health, dental, disability, life). Employer paid retirement contributions, and employer paid taxes.


The ERC Credit is available to any business who suffered a 50% decline in gross receipts in one or more calendar quarter in 2020 compared to the same calendar quarter in 2019 or was impacted by a gov’t ordered full or partial shutdown in that year. For 2021, any quarter in which gross receipts are less than 80% of the same quarter in 2019 qualifies for the ERC credit. Wages are used to calculate the credit and include gross wages and employer paid health insurance and cannot have been used in PPP loan forgiveness. The available credits can equal up to $5,000 in 2020 and $7,000 in 2021 per employee.


To maximize the PPP forgiveness and ERC credit you need to complete the following steps:

  1. Calculate your required PPP loan forgiveness payroll costs (60% of you PPP loan). Ideally use the smallest time period to meet your 60% threshold.

  2. Calculate the 40% of your non-payroll costs and make sure you have enough expense to cover this during the PPP period.

  3. Maximize ERC wages by person for eligible periods.

  4. 4. Double check to make sure you have no overlap between the PPP and ERC wages.

Due to both the PPP loan forgiveness and the ERC Credit heavily relying on wages for their calculations we suggest that you wait on applying for forgiveness until have calculated all of your ERC credits. Even if you have to make a few payments, they will be returned once your loan is forgiven. This will maximize your ultimate relief.


We are available to answer all your questions about the PPP loan forgiveness and the ERC credit. Please do not hesitate to reach out to us if you think you are eligible or need help finding out if you are.



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