How to Calculate ERC

In March of 2020, many businesses were temporarily closed or restricted due to the COVID-19 pandemic. Other businesses were allowed to remain open, but saw sharp drops in revenue. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed to provide support to businesses—with a focus on encouraging employees to keep workers on their payroll. The law included the Paycheck Protection Program (PPP) and Employee Retention Credit (ERC). 

At Sunrise Business Solutions, we specialize in the Employee Retention Credit. Too many businesses have not applied for their ERC tax credit refund checks—but there is still time. Our team is committed to helping clients secure the maximum credit that they are entitled to under the law. This raises an important question: How do you calculate your ERC benefits? The answer depends on a number of different factors. In this article, you will find a comprehensive guide to calculating the ERC for 2020 and 2021. 

Background: What to Know About the Employee Retention Credit

Created as part of the CARES Act, the Employee Retention Credit is a fully refundable tax credit that is available to qualifying companies that have sustained COVID-19 government restrictions such as cleaning and sanitizing, capacity restrictions and more.  We know how you qualify, supported by a government order.  . The United States Department of Treasury explains that “businesses that received PPP loans in 2020 or 2021 can still claim the ERC.” The tax credit is a separate economic program that was designed to both incentivize employers to keep employees on their payroll and to reward the employers that did so. 

The Employee Retention Credit applies to six quarters in total—spanning from March of 2020 through September 30th, 2021. Sunrise Business Solutions guarantees you qualify and will help you file for all 6 quarters. As the ERC is fully refundable, it is very similar to a grant for qualifying businesses. A company that successfully applies for an Employee Retention Credit will receive a check from the Internal Revenue Service (IRS) for each quarter. How much will the ERC check be for? It is important to know exactly how the Employee Retention Credit is calculated. 

Your Guide to Calculating the Employee Retention Credit (ERC)

The Employee Retention Credit is calculated on a quarterly basis. During each quarter that a business qualifies for the ERC refundable tax credit, it can claim up to 50 percent of the “qualified wages” for each of its eligible employees. The first step in calculating your company’s ERC credit is to understand what constitutes qualified wages for the purposes of the program. It depends, in large part, on the size of the company. Companies with 100 or fewer full time equivalent employees can claim a larger share of their wages for the tax credit. Additionally, the calculation for the ERC varies based on the year that your company claims the credit. Here is what you need to know: 

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• 2020: For 2020, the Employee Retention tax credit is calculated at 50 percent of a worker’s qualified wages, up to a maximum annual credit of $5,000. In other words, if an employee has more than $5,000 in qualifying wages in 2020, an employer can claim a maximum $5,000 tax credit for that employee. If a company claimed the maximum benefit for three employees in 2020, it would receive a $15,000 Employee Retention Tax Credit. 
• 2021: For 2021, the Employee Retention tax credit is calculated at 70 percent of an employee’s qualifying wages, up to a maximum of $7,000 per quarter. For the vast majority of businesses, the ERC can only be claimed for the first three quarters of 2020. A business that claims that maximum amount for an employee for 2021 can get up to a $21,000 tax credit. If a company claimed the maximum benefit for two employees for 2021 and claimed the benefit for a third employee for a single quarter, it could receive ERC funds of $49,000 for the year. 

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You Do Not Have to Calculate Your ERC Benefit Alone 

Navigating the ERC application process can be confusing, stressful, and overwhelming. While there are funds available for qualifying businesses—many companies are struggling to figure out exactly how much they can receive. At Sunrise Business Solutions, our ERC specialists are standing by, ready to calculate your tax credit for all six quarters. If your business qualifies for the Employee Retention Credit, it is imperative that you understand how much is available. Ultimately, the ERC is always calculated on a case-by-case basis. At Sunrise Business Solutions, we have worked with a wide range of clients, helping: 

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• A home health care agency secure $419,991 in ERC tax credits; 
• A dental practice secure $128,411 in ERC tax credits; and
• A child care center secure $359,869 in ERC tax credits. 

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Employee Retention Credit: Frequently Asked Questions (FAQs)

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Can You Still Claim the ERC in 2022?

Yes. This is one of the most common questions that people currently have about the Employee Retention Credit. While this tax credit only applies to the final three quarters of 2020 and the first three quarters of 2021, it is not too late to apply for ERC funds. There is a special ERC provision within the CARES Act that establishes a three-year payroll lookback option for all businesses. 

Simply put, the lookback provision gives businesses up to three years to submit an ERC application for any given quarter. Even if your company already filed a 2020 tax return and/or a 2021 tax return, you have the right to file an amended return at any point in 2022 to claim the Employee Retention Credit. Do not wait to get your funds: You still have time to apply for the ERC. 

Can You Apply for the Employee Retention Credit If You Got PPP Funds?

Yes. While both the Payroll Protection Program (PPP) and the Employee Retention Credit (ERC) came out of the CARES Act, they are not “either/or” options for businesses. Instead, they are two separate programs that were designed to help incentivize and reward companies that kept workers on their payroll despite seeing real financial challenges. Your business can apply for the ERC even if it received PPP funds. Indeed, many ERC recipients got PPP funds. Though, that is not required. If your company never applied for the PPP, you can still apply for the ERC tax credit.

Which Employers are Eligible to File  for the ERC Tax Credit?

The Employee Retention Credit is available to both private sector businesses and certain tax-exempt organizations and local government offices (State, City and County). To apply for the ERC, an employee must have a qualifying COVID-19-related financial hardship for the quarter in which they are seeking benefits. The standard can be met if either of the following two things occurred: 

1. Government Suspension of Operations: If an employer’s operations were fully or partially suspended by a local, state, or federal government restriction due to COVID-19, an employer can file for the ERC on those grounds.  Examples of partial suspensions are cleaning and sanitizing, social distancing, capacity restrictions and much more (Include Link here for FAQ). 
2. Revenue Loss: An employer can also apply for the ERC if it sustained a substantial decline in gross receipts (revenue) during any of the six applicable quarters. What constitutes a qualifying decline in revenue varies based on the specific quarter in question. 

How the ERC Experts that Sunrise Business Solutions Can Help 

Calculating Employee Retention Credit tax benefits is complicated. The entire process can be confusing—and as a consequence many employers have still not applied for the full and fair tax credit that they are entitled to under federal law. At Sunrise Business Solutions, our team makes the application process as easy and smooth as possible. We can help you calculate exactly how much your company can receive through the ERC. Here is how our simple four step process for applying for the Employee Retention Credit works: 

• Step #1:  We provide comprehensive ERC services to employers. Every claim starts with a risk-free, in depth assessment of your Employee Retention Credit eligibility. You can securely upload key documents and our ERC specialists will conduct a detailed-driven review. 
• Step #2: After carefully reviewing and assessing the information that you provide, we will use a state-of-the-art, proprietary system to calculate your maximum ERC benefit. Our team will look at all six quarters. It is not too late to apply for the 2020 ERC or the 2021 ERC. 
• Step #3: The Employee Retention Credit application can feel daunting. Like other tax issues, there is a lot of paperwork involved. The good news is that you do not have to do it alone. In fact, our ERC specialists will take care of everything—including your amended Form 941. 
• Step #4: The final step in the process is receiving your Employee Retention Credit money. This is a fully refundable tax credit—meaning the IRS will mail you a check for each of the six quarters that your business is eligible for ERC benefits. 

Speak to Our ERC Specialists Today

At Sunrise Business Solutions, our team of experts guarantee businesses and organizations secure their ERC benefits 100% Risk free. If your company kept employees on payroll during the pandemic, you can and should apply for the tax credit. If you have any specific questions or concerns about how the Employee Retention Credit is calculated, we can help. Call us at 888-210-8870  or contact us online at SUNRISE@SunriseBusinessSolutions.com to arrange your completely confidential, no obligation consultation with a top ERC specialist. 

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