I am sure many of us have clients who have received PPP loans and they still have not been allowed to reopen. The 8 week period after receipt of loan proceeds will be ending within a few weeks for many of these companies. My understanding is that the only way for a business who has received a PPP loan to utilize the Employee retention credit is to repay the loan by May 14. Is this other's understanding of this or can the credit be used somehow even if the PPP loan is not repaid by May 14? In light of this predicament, is it advisable to have these clients repay the loan now with the expectation that at least they will get some benefit between now and the end of the year with the credit?
Also, do I understand the working of the credit properly? As an example, say a client starts having payroll before the second quarter is over and either they qualify for the credit because they had been forced to close as a non-essential business or their gross receipts have dropped by 50% or more in the second quarter compared to 2019.
Wages paid to five employees from June 15-June 30, 2020 equal to $4,000 per employee for a total of $20,000 for the second quarter.
Would the credit be equal to $10,000 to the employer for the second quarter? The employer could physically receive the $10,000 through a combination of filing their 941 and Form 7200[if necessary]. If so, it seems that many companies should make the decision to repay the PPP loan by May 14 or am I missing something? I realize there could be a change in the laws that lengthen the 8 week period of the PPP loan to a longer period, but, we don't know if this in fact will happen. Any thoughts would be greatly appreciated.