ERC vs. PPP: What’s the Difference?

If you own a small to medium-sized business, we don’t have to tell you how tough the last few years have been. In fact, PNAS estimates that over 40% of small businesses had to close their doors at least temporarily, and Forbes reported that, “small business revenues dropped 52%,” during the pandemic.

If you took advantage of the Paycheck Protection Program (PPP), the complexity of the tax code and qualifications of the Employee Retention Tax Credit (ERC or ERTC) may have been alarming. Due to lack of knowledge, many CPAs have actually told clients their businesses did not qualify for the ERC refund even though they actually did. While some small businesses have taken advantage of the tax refunds available, many others are hesitant because they have been incorrectly advised by their CPA, are afraid of a difficult qualification process, or think it’s too late to apply. Each of these factors has contributed to the drastic underutilization of these funds that we see today.

Fortunately, it is not too late to apply for the ERC refund — but it will be soon. If you’re interested in learning how to put money back into your business, Innovation Refunds is here to help.

Below, we’ll provide insight on how you can take advantage of the CARES Act through the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC). We’ll also discuss how you can use these opportunities together to maximize your benefits and set your business up for success in 2023, and beyond!

The Paycheck Protection Program (PPP)

In March of 2020, the U.S. Congress included the Paycheck Protection Plan as part of the CARES Act to aid eligible businesses in covering their payroll expenses. These loans, when approved within a certain period of time, were eligible for loan forgiveness through the Small Business Administration (SBA).

The PPP loan program was extended a second time with fewer restrictions, allowing more businesses to apply and in some cases re-apply for a “second-draw” loan. While the date to apply for a PPP loan has since passed, SBA confirmed that as long as eligibility requirements were met, borrowers may apply for loan forgiveness any time before the maturity date of the loan — either two or five years from the start of the loan period.

The Employee Retention Credit (ERC)

In an effort to provide additional relief to businesses affected by the COVID-19 pandemic, Congress created the Employee Retention Credit — a stimulus program available to small to medium-sized businesses.

The ERC offers up to $7,000 in tax refunds per employee on the payroll for the first three quarters of 2021. Your small business may be eligible to receive a maximum yearly benefit of $21,000 per employee for 2021. A smaller, but still hefty, benefit of up to $5,000 per employee in 2020 is also available. Bringing the total available refund, per eligible employee, to $26,000!

This could potentially mean tens of thousands of dollars refunded to your business, as Congress intended. However, the difficult tax code and initial qualification limitations have led many small businesses and even CPAs to make these common mistakes, causing them to miss out on money they may be eligible to receive.

However, the window of opportunity is closing on those who haven’t applied for their particular tax refund — and the amount of small businesses that have applied is much lower than the estimated percentage of eligible businesses.  


Even though the deadline has already passed for new PPP applications, business owners can still reap the benefits of the CARES Act through the Employee Retention Tax Credit. Businesses that applied for the PPP loan may still qualify for the ERC.

To claim the ERC tax credit, your business must:

  • Had less than 100 employees in 2019 to qualify for the 2020 ERC, and had less than 500 employees in 2019 to qualify for the 2021 ERC.
  • Have been fully or partially closed during any part of 2020 and/or 2021 OR your gross receipts for any quarter of 2020 declined by 50% or more when compared to the same quarter of 2019. This is reduced to a decline of only 20% within any one quarter of the year in 2021.
  • Have kept employees on the payroll.

Pros of ERC vs. PPP

If the reason you did not or are not planning to apply for the ERC refund is that your business obtained a PPP loan, you are passing up the opportunity to put more free money back into your business. There is no longer a limitation on receiving either a PPP loan or ERC refund.

With the ERC application still open, you can:

  • Apply for funds based on your previous payroll status or financial hardship due to COVID-19 during the dates of 3/23/2020 - 9/30/2021.
  • Lower your social security tax liability.
  • Maximize your refund and put cash directly into your business without having to worry about having to pay it back!


If you received a PPP loan, then adding an ERC on top of that money back is a huge win in itself. However, the rules regarding your ERC AND getting PPP loan forgiveness are complex and may require the help of an ERC Originator to receive the maximum refund your business is eligible to receive.

For example, choosing which wages to report for ERC vs. PPP can impact the refund amount for your ERC and the status of your PPP loan. When utilized correctly, you’ll have the best of both pieces of legislation, allowing you to recover from the impact of the pandemic and grow your business.

Claim Your Business' Employee Retention Credit

Working with an ERC Originator gives you access to a team of tax professionals to help answer your questions. It can also give you peace of mind that our network of tax attorneys will help you file the right documents so your business can get the maximum refund it is eligible to receive.  

At Innovation Refunds, our mission is to assist small and medium-sized businesses in getting eligible cash incentives from federal and state governments. With over 300 combined years of business and accounting experience, we’re here to offer you a simpler, faster approach to claiming the refund your business deserves.

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