The Employee Retention Credit – a fully refundable payroll tax credit also known as the ERC or ERTC – incentivized businesses to retain employees in response to the COVID-19 pandemic. It applies to certain qualified wages paid to employees from March 13, 2020, to December 31, 2020, before the American Rescue Plan Act of 2021 extended the tax credit to the end of 2021. It has proven to be a vitally important tax credit for many businesses, but how does the ERC interact with other tax credits or deductions?
ERC and PPP
Although the ERC is a separate credit from other tax credits and deductions, it can interact with certain other credits in different ways. For instance, as a business owner, you can claim the ERC if you obtained a Paycheck Protection Program (PPP) loan – previously, you couldn’t benefit from both.
As long as the payroll identified for the ERC was not paid out of PPP funds, one business can utilize both, provided the employer doesn’t attempt to “double dip.” If you’ve taken a PPP loan and are looking to apply for the ERC, make sure you have documentation showing you aren’t trying to use both programs to cover the same wages.
Work Opportunity Tax Credit (WOTC) and ERC
But what about claiming the ERC and the Work Opportunity Tax Credit (WOTC)?
The WOTC is a credit for “employers who invest in American job seekers who have consistently faced barriers to employment,” according to the United States Department of Labor, and targeted groups of workers include unemployed veterans, ex-felons, families receiving TANF or SNAP assistance, and more.
According to the IRS, “an Eligible Employer may not claim the Employee Retention Credit and the WOTC for the same employee for the same period of time.”
How Does the ERC Interact With Other Credits?
There are several other tax credits businesses can take advantage of, including the Research and Development Tax Credit, disaster relief tax credits, family and medical leave tax credits, and more.
If you have concerns about how your usual credits and deductions interact with the Employee Retention Credit, you should turn to a reputable tax advisor for assistance – like those on the team at Dayes Law Firm.
We recommend getting the ERC team that Dayes Law Firm and our partners can provide to help you apply for the ERC program and maximize any credits and deductions you’re allowed to claim alongside it, while also avoiding any “double-dipping” or other errors that could result in penalties, fines, or a dreaded IRS audit.
We have assisted businesses in filing for millions in Employee Retention Tax Credit claims to date and are proud of all the work our team has done so far involving this special tax credit program.
At Dayes Law Firm, we have a record of success when it comes to the ERC, and we can help you work out how it interacts with other tax credits and deductions. Contact us for a free, no-obligation consultation to see how we can assist you and your business today. Call or fill out the form on this page to learn more!