Although called a “tax credit”, the ERTC is distributed to the company as direct payment from the government. In addition, most of the notice reiterates the ERTC FAQs that were previously posted on the IRS website. However, if your company did apply for a PPP loan, you cannot apply for the ERTC for the same salary counted for PPP forgiveness. The ERTC was designed to encourage companies of all sizes to keep employees on their payroll during this difficult economic period.
Companies can use the ERTC program to cover certain payroll costs that exceed the money received under a Paycheck Protection Program (PPP) loan. Therefore, eligible companies that didn't initially apply for their ERTC could do so until 2024, depending on when they originally filed or paid their business taxes. Consequently, it is important to ensure that all eligible expenses, including non-payroll costs, such as utility, rent and operating expenses, to name a few, are included in PPP loan forgiveness applications to maximize the qualified salaries available to ERTC. Remember that ERTC credits only apply to costs that are not yet covered by the PPP; a “double reduction” is not allowed.
A provision of the ERTC program has an “initial recovery provision” that allows newly formed companies to apply for credits. It's important to know that you may still qualify for the ERTC, even if you applied for or received the PPP or other COVID relief funds. It will take approximately 5 to 8 months for the government to process your ERTC application and will mail your credit checks directly to your company. While the ERTC is a great tool to help struggling companies reduce their tax burden, it's still a bit difficult to take advantage of it.
In addition, companies that temporarily suspended people but maintained their health benefits, such as some car dealerships, can apply for ERTC credits for insurance costs.