Calculating Your Employee Retention Credit:

Jul 05, 2023

As a business owner, you know how important it is to retain your employees. Not only does it save you time and money on training new hires, but it also boosts morale and productivity. The Employee Retention Credit (ERC) is a tax credit that rewards businesses for keeping their employees on staff during tough economic times. Here's how to calculate your ERC:

Eligibility Requirements

Before calculating your ERC, you need to make sure your business is eligible. The ERC is available to businesses that:

  • Were fully or partially suspended due to COVID-19
  • Experienced a significant decline in gross receipts
  • Have fewer than 500 employees

If your business meets these requirements, you're on your way to calculating your ERC.

Not sure? Start here today so you don't miss out on anything you might be eligible for.

Calculating Your ERC

The ERC is calculated based on the wages you paid to your employees during the eligible period. The eligible period is from March 13, 2020, to December 31, 2021. Here's how to calculate your ERC:

  1. Determine the qualified you paid to each employee during the eligible period. Qualified wages include the cost of the employee's health benefits.
  2. Multiply the qualified wages by the ERC rate. The ERC rate is 50% of the qualified wages, up to a maximum of $10,000 per employee.
  3. Subtract any other COVID19 tax credits you've received, such as the Paycheck Protection Program (PPP) loan forgiveness.

Once you've completed these calculations, you'll have your total ERC. This credit can be used to offset your payroll taxes or refunded to you if you don't owe any payroll taxes.

Maximizing Your ERC

If you want to maximize your ERC, consider the following strategies:

  • Review your employee records to ensure you're capturing all eligible wages.
  • Consider bringing back furloughed or laid-off employees to increase your qualified wages.
  • Work with a tax professional to ensure you're taking advantage of all available tax credits and deductions.

By maximizing your ERC, you can save your business thousands of dollars in payroll taxes and boost employee morale by keeping them on staff.

Conclusion

The ERC is a valuable tax credit that rewards businesses for retaining their employees during tough economic times. By understanding the eligibility requirements and calculating your ERC correctly, you can save your business thousands of dollars and improve employee morale. If you need help calculating your ERC or maximizing your tax savings, consider working with a tax professional.

employee retention credit

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