The CARES Act is a piece of legislation passed by the United States Congress on March 27, 2020, and signed into law by President Trump. This law was created to provide emergency relief and economic support to various entities affected by the COVID-19 pandemic.
The act encompasses a broad range of provisions, including financial assistance to individuals, families, small businesses, and industries adversely affected by the pandemic. The CARES Act seeks to mitigate the financial and economic repercussions of the pandemic, as well as address the public health crisis caused by the coronavirus.
Some of the specific measures included in the CARES Act are the provision of direct stimulus payments to individuals, the expansion of unemployment benefits to assist those who lost their jobs due to the pandemic, and the allocation of funding to support small businesses and industries struggling to stay afloat. The CARES Act also includes provisions to support healthcare providers and hospitals, increase COVID-19 testing and treatment, and develop vaccines to combat the pandemic.
The PPP was a loan program initiated by the Small Business Administration (SBA) in response to the economic fallout caused by the COVID-19 pandemic.
The program was established under the CARES Act to offer financial assistance to small businesses and non-profit organizations affected by the pandemic. This SBA-backed loan helped businesses keep their workforce employed during the COVID-19 crisis.
The PPP provided loans that were forgivable to eligible small businesses and non-profit organizations to cover payroll expenses, rent, mortgage interest, and utility bills. These loans were aimed at helping businesses retain employees and sustain their payroll during the pandemic. The loan amount was based on the applicant’s payroll expenses, and borrowers would qualify for full loan forgiveness if they satisfied certain conditions.
In order to apply for a PPP loan, businesses had to approach participating lenders, which could be banks, credit unions, or other financial institutions. The application process was simple, and the SBA provided useful information and resources to assist applicants with the application process.
Overall, the PPP provided critical financial aid to small businesses and non-profit organizations during the pandemic, enabling them to maintain operations and continue paying their employees during this difficult time.
The ERC is a tax credit introduced to incentivize eligible employers to maintain and continue paying their workforce amid the COVID-19 pandemic. The CARES Act established this credit in March 2020, and it was extended through several legislative actions, including the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021. To qualify, the employer must have faced a significant decline in gross receipts or been subject to a full or partial shutdown by a government order.
For 2020, the tax credit is 50% of up to $10,000 in qualified wages paid by an employer between March 13th and December 31st if their business was wholly or partially suspended because of governmental orders or whose gross receipts declined by more than 50% for a given quarter in 2020 as compared to the same quarter in 2019.
In 2021, the credit was increased to 70% of up to $10,000 in qualified wages paid per quarter (rather than for the entire year) during Q1, Q2, and Q3, and potentially Q4 for recovery startup businesses (subject to a $50,000 limit). In addition, the gross receipts threshold was eased to a more than 20% decline for a given quarter in 2021 as compared to the same quarter in 2019.
This credit can be claimed against employment taxes and is available to businesses of all sizes, including tax-exempt organizations. Even if a business received a PPP loan, it might still qualify for the ERC.
The ERC has been a valuable financial aid for eligible employers, allowing them to retain their employees during the pandemic’s challenging times. It has played a critical role in keeping businesses afloat and helping them sustain their operations while navigating the adverse economic impact of the COVID-19 pandemic.
The CARES Act was signed into law on March 27, 2020, and aimed to provide relief in several key areas, including direct payments to individuals, expanded unemployment benefits, and loans and grants for small businesses.
The PPP was one of the most significant programs established under the CARES Act. The PPP provided forgivable loans to small businesses to cover payroll and other essential expenses. The program was launched on April 3, 2020, and quickly became a lifeline for many struggling small businesses.
On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The PPPFA made several changes to the PPP, including extending the loan forgiveness period and lowering the percentage of loan proceeds required to be used for payroll expenses. The PPP loan application deadline was extended to August 8, 2020, and ultimately, the program provided billions of dollars in financial assistance to small businesses across the United States.
In addition to the PPP, the CARES Act also provided economic impact payments, commonly referred to as stimulus checks, to eligible individuals. The Internal Revenue Service (IRS) began distributing these payments on April 10, 2020, with millions of Americans receiving much-needed financial assistance.
When the CARES Act was originally passed, you could only apply for either the PPP or the ERC, and most people went with PPP because it was faster and easier. For the ERC, you needed to apply through a tax return, and the IRS had to approve it. The PPP, conversely, was funded by SBA. However, the PPP eventually ran out of money. This led to many people missing out on the opportunity to benefit from the CARES Act. The Consolidated Appropriations Act, 2021 (CAA), signed into law on December 27, 2020, provided additional relief, including a second round of stimulus checks and an extension of the PPP. The SBA reopened the PPP loan application process for eligible small businesses on January 11, 2021.
Initially, an organization that received a PPP loan was not eligible for the ERC. However, with the CAA, a business that received a PPP loan could now also apply for the ERC retroactively back to 2020.
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law. The ARPA provided additional relief, including a third round of stimulus checks, an extension of unemployment benefits, and additional funding for the PPP.
The PPP loan application deadline was extended to May 31, 2021, and on May 4, 2021, the SBA announced that funding for the PPP had been exhausted, and the PPP loan application portal stopped accepting applications.
The Economic Injury Disaster Loan (EIDL) program was extended through to December 31, 2021, as part of the Continuing Appropriations Act, 2022, signed into law on July 28, 2021. The PPP loan forgiveness application deadline for loans approved on or before March 31, 2021, passed on September 30, 2021.
Overall, the CARES Act was a significant legislative effort to address the economic impact of the COVID-19 pandemic on the United States. Its provisions, including the PPP, stimulus checks, and expanded unemployment benefits, provided crucial financial assistance to individuals and businesses struggling during the pandemic. The PPP and other programs established under the CARES Act and subsequent legislation continue to offer support to businesses as the pandemic and its economic effects persist.
The ERC and the PPP were two significant programs established under the CARES Act to provide financial support to businesses affected by the COVID-19 pandemic. Although there are similarities between these programs, there are also significant differences between them.
The PPP aimed to provide forgivable loans to small businesses to help them cover payroll expenses and other essential costs, thus retaining their employees during the pandemic. On the other hand, the ERC provided a refundable tax credit to eligible employers who paid wages to their employees during the pandemic.
One significant difference between these programs is their eligibility criteria. PPP loans were only available to businesses with 500 or fewer employees. Additionally, PPP loans were forgivable if certain conditions were met, while the ERC provided a tax credit that could be applied against payroll taxes or refunded if the credit exceeded the employer’s payroll tax liability.
The maximum number of employees for ERC was initially set at 100 full-time workers for 2020 but was later increased to 500 for 2021 for all employee wages to potentially qualify, while employers above such thresholds could only qualify for wages paid to employees for not performing services.
Other key differences between ERC and PPP include the fact that ERC is paid through the IRS in treasury money. In comparing PPP and ERC, there is a big difference in knowing where the money will be coming from. Some businesses feel that they shouldn’t take the money they don’t need. On the other hand, one critique was that some larger businesses got PPP money that may not have needed it.
While both the PPP and ERC provided essential financial assistance to businesses affected by the pandemic, the PPP focused on providing forgivable loans to small businesses to cover payroll and other essential expenses, while the ERC provided a tax credit to eligible employers who paid wages to their employees during the pandemic.
Sagemont Tax is dedicated to helping businesses get the ERC credit they are eligible for and takes away the confusion and headaches of navigating the Employee Retention Credit process. The company has a team of highly qualified JDs, Big Four CPAs, and payroll experts with decades of experience to help clients claim their ERC refunds.
The company was founded by husband and wife team Kenny Dettman and Casey Finigan. While chatting over a quarantine dinner, the couple came up with the idea of Sagemont Tax. Kenny was a partner at a top accounting firm, which wasn’t interested in taking smaller clients who needed the credit. Seeing an opportunity to help small business owners, Casey made a website to use as a marketing and outsourcing tool to connect clients to Kenny and other companies with CPAs willing to take them on.
Sagemont Tax grew, and Kenny decided to leave his partner position and join the company full-time. Since then, the company has grown to have over 2,000 clients. In the process, Sagemont Tax has positioned itself as the leading ERC advisory firm in the country.
There are several advantages of working with Sagemont Tax, including a long-standing relationship with various insurance brokerages to provide insurance policies on ERC claims. In addition, Sagemont Tax has a strong relationship with top law firms, one of which helped advise Congress on the Employee Retention Legislation for COVID-19. The company is led by industry experts and credential professionals and backed by reputable corporate partners.
Sagemont Tax has found that nine out of ten clients have advisors that have either incorrectly concluded that the company is not eligible for credit or are not aware of the ERC credit. As ERC was released under three complex stimulus packages, the confusing IRS guidance has left many companies unable to take advantage of this opportunity. It’s also important for a regular tax advisor or CPA to stay on top of all the updates and changes to the program.
Another reason why ERC often gets neglected is that CPAs tend to focus on income tax-related matters, leaving payroll issues to payroll providers, who often do not have the required technical assistance in dealing with ERC matters. The ERC also has a legal component; more than half of the eligibility for the credit comes from this legal test. This is why you need to work with an ERC expert who employs both accountants and lawyers to process your credit.
Sagemont Tax uses a proprietary model to maximize ERC credit within the PPP-covered period for clients. The propriety model allows Sagemont Tax to analyze PPP-ERC interaction at the employee level to maximize the ERC benefit while maintaining the client’s ability to claim full PPP forgiveness in cases where it is applicable.
If your company ever gets audited, you need an ERC partner to support you through the IRS audit. Sagemont Tax offers the services of attorneys and CPAs with years of experience to assist in working through the IRS audit. Clients don’t have to worry about any independence or audit-based conflict issues when working with Sagemont Tax.
The Sagemont Tax Client Package includes an audit-ready support file and a 20+ page report with detailed analytics and calculations for your credit claim. While this documentation should cover any scrutiny from the IRS, Sagemont Tax also offers customer support through experienced CPAs and lawyers on the team. You can learn more about Sagemont Tax through their FAQs page.
Sagemont Tax’s team of CPAs, lawyers, and payroll specialists combine their expertise to provide a uniquely holistic ERC service offering that ensures technical soundness unmatched by traditional income tax CPAs. At Sagemont Tax, we’re committed to excellence, and our brand is quickly being recognized as one of the top professional Employee Retention Credit firms in the United States. To learn more about how we can help you calculate, document, and claim your ERC, contact us here or call 754-202-3055.
