The Employee Retention Credit (ERC) was introduced in March 2020 as part of the CARES Act, alongside the Paycheck Protection Program (PPP), to help businesses weather the COVID-19 storm. “Originally, all of the small businesses in the US were thinking they couldn’t do the ERC if they did the PPP,” recalled Jenn McCabe, Partner-in-Charge at U.S. accounting firm Armanino. “…[Y]ou can do both, as long as you don’t use the same wages for both programs,” she added. This clarification helped many small businesses access much-needed aid.
As the pandemic evolved, so did the ERC. Subsequent legislation extended eligibility into 2021, but McCabe noted, “In retrospect, [the extension] was unnecessary, because most businesses were recovering by Q1 of 2021.” The complexity of eligibility increased, and the IRS was slow to provide guidance, leading to widespread confusion and, eventually, abuse.
To dig deeper, visit the original article on the Thomson Reuters blog.