Employee retention credit calculator

To calculate the Employee Retention Credit (ERC), you’ll need to consider several factors. Here’s a basic outline of the steps involved:

1. Identify Eligibility: Confirm if your business qualifies for the ERC. Factors include experiencing a significant decline in gross receipts or facing a full or partial suspension of operations due to government orders related to COVID-19.

2. Determine Qualified Wages: The ERC is based on qualified wages paid to employees. For eligible employers with 500 or fewer full-time employees in 2019, qualified wages can include the cost of providing health care benefits.

3. Calculate Credit Percentage: The credit percentage varies depending on the time period. In 2021, it was generally 70% of qualified wages per employee per quarter, up to $10,000 per quarter. In 2022, it changed to 70% of qualified wages per employee per quarter, up to $12,000 per quarter.

4. Identify Time Period: Determine the time period for which you’re claiming the credit. The ERC was available for different quarters in 2020, 2021, and 2022. Each period might have different rules and credit amounts.

5. Claim the Credit: Use Form 941 (Employer’s Quarterly Federal Tax Return) to claim the ERC. You can report the credit on this form to reduce your federal employment tax deposits.

6. Consult a Tax Professional: ERC calculations can be intricate due to evolving regulations and provisions. It’s advisable to seek guidance from a tax professional or use specialized software to ensure accurate calculations and compliance with IRS guidelines.

Remember, the ERC rules can be complex, especially considering updates and changes made due to legislative actions or new regulations. Always consult with a tax professional or refer to official IRS guidance for accurate calculations and eligibility requirements specific to your situation.