ERTC vs. PPP: How They Work Together and Key Differences

The Employee Retention Tax Credit (ERTC) and the Paycheck Protection Program (PPP) were both designed to help businesses stay afloat during the COVID-19 pandemic. However, many business owners are still unclear on how these programs differ, how they interact, and whether they can take advantage of both.

Initially, businesses had to choose between ERTC and PPP, but later updates to federal relief programs allowed eligible businesses to claim both benefits. Understanding how these two programs work together can help businesses maximize their financial recovery.

This guide breaks down the key differences, how they can be used together, and how to ensure you receive the full benefits from both.

1. What is the Employee Retention Tax Credit (ERTC)?

The Employee Retention Tax Credit (ERTC) is a refundable payroll tax credit designed to help businesses that kept employees on payroll during the pandemic.

ERTC Basics:

✅ Refundable tax credit—reduces payroll taxes and provides cash refunds
✅ Covers qualified wages paid in 2020 and 2021
✅ Available to businesses that experienced revenue declines or were impacted by government shutdowns
✅ Can be claimed retroactively through an amended payroll tax return (Form 941-X)

💡 Maximum Benefit: Businesses can receive up to $26,000 per employee ($5,000 in 2020 + $21,000 in 2021).

2. What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program (PPP) was a forgivable loan program that provided businesses with funds to cover payroll costs, rent, and utilities during the pandemic.

PPP Basics:

✅ Forgivable loan if used for eligible expenses
✅ Funds could be spent on payroll, rent, mortgage interest, and utilities
✅ No repayment required if at least 60% of funds were used on payroll
✅ Application was processed through approved SBA lenders

💡 Maximum Benefit: Loan amounts were based on 2.5x average monthly payroll costs, up to $10 million per loan.

3. Key Differences Between ERTC and PPP

FeatureERTCPPPType of AssistanceTax CreditForgivable LoanFunding SourceIRSSBAHow Funds Are UsedPayroll tax reduction and refundsPayroll, rent, mortgage, utilitiesEligibility RequirementsRevenue decline OR government-mandated shutdownBased on payroll costs, with no revenue decline requirementRepaymentNo repayment requiredNo repayment if at least 60% of funds used for payrollApplication ProcessFiled with IRS through Form 941-XApplied through SBA-approved lendersDeadline to ApplyApril 15, 2024 (2020 claims) & April 15, 2025 (2021 claims)Applications are closed; forgiveness deadlines apply

Both programs provided critical relief, but ERTC is still available retroactively, while PPP applications have closed.

4. Can You Claim Both ERTC and PPP?

Yes! Initially, businesses had to choose between ERTC or PPP, but the Consolidated Appropriations Act (2021) changed that. Businesses can now take advantage of both programs, but cannot use the same payroll wages for both benefits.

Key Rule: No “Double Dipping”

• You can’t use PPP-funded payroll costs to claim ERTC.

• You must separate wages used for PPP loan forgiveness and wages used for the ERTC.

💡 Example:

• A business received $200,000 in PPP funds in 2021 and used it entirely for payroll.

• If they allocated all wages toward PPP forgiveness, they cannot use those same wages for the ERTC.

• However, if they paid additional wages beyond PPP funds, those wages can be used for the ERTC claim.

Carefully tracking payroll expenses ensures businesses can maximize both benefits without violating program rules.

5. How to Use PPP and ERTC Together Effectively

To maximize benefits from both programs, businesses should follow these strategies:

✅ 1. Separate Payroll Costs for Each Program

• Use PPP funds for some payroll expenses and allocate non-PPP-covered wages for ERTC.

• Keep detailed payroll records to prevent double-counting wages.

✅ 2. Apply for ERTC Retroactively

• If you didn’t originally claim the ERTC, you can file an amended payroll tax return (Form 941-X) to claim refunds for 2020 and 2021.

• The IRS is still processing retroactive claims, so applying ASAP is recommended.

✅ 3. Maximize the ERTC Benefit

• Since PPP forgiveness only required 60% of funds to be used for payroll, use the remaining payroll costs toward ERTC eligibility.

• This strategy ensures businesses get the maximum available ERTC refund while still having their PPP loans forgiven.

6. How Much Can Your Business Receive?

ERTC Maximum Credit:

• 2020: Up to $5,000 per employee for the entire year

• 2021: Up to $7,000 per employee per quarter ($21,000 total per employee)

• Total Possible Refund: Up to $26,000 per employee

PPP Maximum Loan Forgiveness:

• Based on 2.5x average monthly payroll

• Loan is fully forgivable if at least 60% was used for payroll

By coordinating the use of PPP funds and ERTC-eligible wages, businesses can maximize relief and receive both loan forgiveness and tax credits.

7. How to Claim the ERTC If You Took a PPP Loan

If your business received a PPP loan, you can still apply for the ERTC retroactively using these steps:

Step 1: Gather Payroll and PPP Records

• Review payroll reports from 2020 and 2021

• Identify which wages were covered by PPP vs. which can be used for ERTC

Step 2: File an Amended Payroll Tax Return

• Use IRS Form 941-X to claim retroactive ERTC refunds.

• A tax professional or ERTC specialist can help maximize your credit without errors.

Step 3: Wait for Your Refund

• IRS refunds typically take 4-8 months, so businesses should apply as soon as possible.

• The deadline for 2020 claims is April 15, 2024, and for 2021 claims is April 15, 2025.

8. Why Business Owners Should Take Action Now

If your business hasn’t claimed the ERTC yet, you may still be eligible for a significant refund—even if you received PPP funds. With deadlines approaching, businesses should review eligibility and apply ASAP.

💡 Remember:
✔ PPP loan applications are closed, but forgiveness deadlines still apply
✔ ERTC can be claimed retroactively until April 2025
✔ No “double-dipping”—separate payroll costs to claim both benefits
✔ Seeking expert help ensures maximum refunds and compliance

Conclusion: Take Advantage of Both ERTC & PPP

The ERTC and PPP were designed to support businesses during financial hardship. While PPP applications are closed, the ERTC remains open for retroactive claims, giving businesses a chance to receive significant refunds.

By strategically using both programs together, businesses can maximize financial relief and strengthen long-term recovery efforts.

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