Many clients are asking us: May I use the same payroll for PPP forgiveness, the ERC, FFCRA, and WOTC?
Although there is no IRS rule prohibiting you from using the same pay period’s payroll for each of these credit and relief options, your organization must separate and specify which payroll dollars are being used for which program. In no case is double-dipping allowed.
Picture each dollar used for any program as being “tagged” for that program. For example, if 80% of Q4 2020 payroll, is being used for PPP forgiveness, then only the remaining 20% of Q4 2020 wages will be available to use for the other programs, assuming the organization qualifies. If the organization should qualify for PPP forgiveness, ERC, FFCRA, and WOTC, it needs to plan with an advisor and determine which dollars should be applied to which program and in which order.
Most likely, you would prioritize the PPP loan forgiveness as part of the planning process, followed by the FFCRA dollars because they are a dollar-for-dollar credit. Next, you would use ERC dollars because a smaller percentage of those payments are allowed in the form of a tax credit (50% of up to $10,000 for 2020, and 70% of up to $10,000 per quarter for the first two quarters in 2021) in relation to the FFCRA credits.
Use the WOTC payroll next (should you qualify and have use for a federal income tax credit in either year), as the maximum percentage of wages for that credit is 40%. If you also qualify for the Employer Credit for Paid family and Medical Leave, those wages would likely be considered after the WOTC wages, as the percentage of wages paid that may apply to the credit ranges between 12.5% and 25%.
As a business owner, it’s your responsibility to ensure that the wages are allocated correctly, across all tax credit platforms. It is recommended that you stick with one tax credit provider who can track your employees’ wages with 100% accuracy. For assistance, reach out to us at 212-635-9500 ext. 219, or complete this Tax Credit Compliance Form today.