The Consolidated Appropriations Act (CCA) passed in late December 2020 allows an employer that is eligible to claim a 2020 employee retention credit (ERC) to now claim a 2020 ERC even though the employer received a Small Business Interruption Loan under the Paycheck Protection Program (PPP). However, to the extent that 2020 ERC qualifying wages have been used as payroll costs in obtaining a PPP loan forgiveness, such qualifying wages may not be used to obtain or increase a 2020 ERC. The change in law made by the CCA allows the taxpayer to count the 2020 wages either toward PPP forgiveness or the ERC, but not both.
IRS guidance just released explains how affected taxpayers may now claim a 2020 ERC credit on their 2020 4th Quarter Form 941, which must be filed by January 31, 2021. Given the extremely tight deadline to choose and file for 2020 ERC on a 2020 4th Quarter Form 941, the IRS guidance states that affected taxpayers may instead choose to file an adjusted return using Form 941-X and include the additional ERC on that adjusted filing.