What Is an ERC Calculation Worksheet and How Does It Help?

July 10, 2023
Dayes Law Firm

The ERC can help many businesses reduce strain on their payroll taxes. That said, how the tax credit works can be confusing, and some employers may wonder how much assistance they can expect to receive.

An ERC calculation worksheet can help you determine this amount. At Dayes Law Firm, we’re prepared to explain the benefits of these worksheets and help you calculate your maximum tax credit.

What Is the ERC?

COVID-19 came with many consequences — not just for the overall population’s health but for businesses, as well. Many companies had to reduce operations and lost revenue as a result. To cut costs, some may have considered letting their employees go.

The ERC helped combat this. The ERC (Employee Retention Credit) offers a refundable tax credit for every employee a business retained during the eligible periods of March 13, 2020, to September 30, 2021 (for a standard business) or December 2021 (for a recovery startup business). This tax credit helps employers cover payroll taxes and keep workers on their staff.

While the program is no longer active, eligible employers may still claim their credit. To do so, you’ll need to file Form 941-X, or the Amended Quarterly Payroll Tax Return, within three years from the end of the program.

How Can You Calculate ERC?

An ERC calculation worksheet can help determine how much relief you can expect. The IRS has created a worksheet for Form 941 to guide you through the calculation process.

Before you fill out the worksheet, you’ll need to determine eligibility. A qualified employer:

  • Was open before February 16, 2020
  • Had fewer than 500 employees
  • Experienced either a full or partial closure or experienced a significant loss in gross receipts

If you qualify, you’ll need to:

  • Determine the number of employees you had during the qualifying periods
  • Determine the wages you paid each employee per quarter
  • Calculate any expenses related to employee health benefits during the qualifying periods

The total amount of qualified wages varies depending on the year. In 2020, the amount maxed out at $10,000 per employee for the year; in 2021, the amount changed to $10,000 per quarter, with a yearly cap of $21,000.

You can only claim a certain percentage of an employee’s wages for the ERC. In 2020, you could claim up to 50% (so at the cap of $10,000, you could claim $5,000). In 2021, you could claim 70% of the total.

What Are the Benefits of an ERC Worksheet?

As a business owner, you want to understand where your finances stand. An ERC calculation worksheet can help you determine your maximum tax credit and whether you’re eligible in the first place. This, in turn, can help you plan for the future. In addition, filling out a worksheet means you have something you can take to professionals for verification.

Request Help With Your Worksheet by Reaching Out to Dayes Law Firm

Eligible employers can receive significant financial relief with the ERC. While filling out an ERC calculation worksheet can help you understand your maximum tax credit, you may still want to speak to a professional for a second opinion.

At Dayes Law Firm, we can answer questions about the ERC, help you fill out your worksheet, and check the accuracy of existing worksheets. Our goal is to help qualified employers understand this credit and guide them through the application process. If you’d like to learn more, call 800-503-2000 or fill out our contact form. Request a free consultation and discover how we can assist with your needs.