How to Calculate Your ERC Eligibility and Benefits

May 19, 2023
Dayes Law Firm

There are a lot of nuances and some complexity when it comes to applying for the Employee Retention Tax Credit (ERC/ERTC). There are several steps you should take to determine your eligibility for the ERC and the benefits you may be able to receive through this program established under the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act.

Calculating the ERC

The ERC is available to eligible employers for wages paid from March 13, 2020, through December 31, 2021. To calculate your eligibility to receive the ERC, you have to first determine that your business is permitted to apply based on that eligibility period. 

Your business also must have experienced fully or partially suspended operations due to government orders to potentially qualify for the Employee Retention Credit – or, if your business underwent a substantial decline in gross receipts during a quarter in that time period when compared to the same quarter in 2019, it may be eligible to claim the tax credit. 

Generally speaking, to qualify for the ERC, your gross receipts for a calendar quarter in 2020 must have been less than 50 percent of the gross receipts for that same quarter in 2019, or at least a 20 percent decline from 2019 to 2021. Getting a tax professional involved to work out the specifics for this qualifying factor might not be a bad decision, particularly if you’re a small business owner and have a lot on your plate.

You’ll also need to work out your full-time employee (FTE) numbers for your business. An FTE is defined as an employee who averages at least 30 hours of service per week or 130 hours per calendar month for the purposes of the ERC. 

Additionally, you’ll need to determine your total qualified wages for 2020 and 2021 and gather paperwork backing your findings. In 2020, businesses can claim up to $5,000 per employee, according to Experian. For 2021, the credit can earn you up to $7,000 per employee per quarter, for a total of $21,000 for 2021.

Applying for the ERC

Although we are long past 2020 and 2021, you can retroactively claim the ERC for those years until April 15th, 2024, and April 15th, 2025, respectively.

Business owners can use Form 941-X to update information not added in Form 941 and claim the ERC. The IRS has information on that form, but the specifics can get confusing. 

Your best bet is to work with a qualified tax professional like the team at Dayes Law Firm for assistance with the Employee Retention Tax Credit. We can help you calculate your eligibility and benefits and make sure everything that you’re turning in to the IRS for ERC-related purposes is accurate. 

The last thing we want your business to deal with is an ERC IRS audit, or even just fines or other penalties the agency could dole out. Please feel free to contact us for a free consultation regarding any of your ERC questions, especially ones having to do with calculating your ERC eligibility and benefits. 

Give Dayes Law a call or fill out the form on this page to learn more. You won’t be under any obligation to work with us after the initial evaluation, but we think we can prove why we are the right choice to help you with your ERC application.

Call today for your free evaluation and make sure you’re maximizing the amount of your ERC refund that you and your business are entitled to!