1. What is the Employee Retention Credit (ERC) for 2021?

The Employee Retention Credit (ERC) is a refundable tax credit for businesses that kept employees on payroll during the COVID-19 pandemic in 2021. It equals 70% of qualified wages paid, up to $10,000 per employee per quarter.

2. How Does the Calculator Work?

The calculator uses the ERC formula:

Where:

• Qualified Wages — Wages paid to employees during eligible quarters
• 70% — The credit rate for 2021
• $10,000 — Maximum qualified wages per employee per quarter

Explanation: The credit is calculated as 70% of qualified wages, capped at $7,000 per employee per quarter (70% of $10,000).

3. Importance of ERC Calculation

Details: Accurate ERC calculation helps businesses claim the maximum available credit, improving cash flow and supporting recovery from pandemic-related economic impacts.

4. Using the Calculator

Tips: Enter qualified wages in dollars. The calculator will compute 70% of the amount, up to the quarterly maximum of $10,000 in qualified wages ($7,000 credit).

5. Frequently Asked Questions (FAQ)

Q1: What qualifies as "qualified wages"?
A: Wages paid to employees during eligible quarters when business operations were fully or partially suspended due to government orders, or during quarters with significant decline in gross receipts.

Q2: Is there a maximum credit per employee?
A: Yes, the maximum credit is $7,000 per employee per quarter in 2021 ($10,000 qualified wages × 70%).

Q3: Which quarters are eligible for 2021?
A: All four quarters of 2021 are potentially eligible, but businesses must meet specific criteria for each quarter.

Q4: Can ERC be claimed if PPP loan was received?
A: Yes, but the same wages cannot be used for both PPP forgiveness and ERC. Different wages must be allocated.

Q5: How is ERC claimed?
A: Businesses claim ERC by filing amended quarterly payroll tax returns (Form 941-X) for eligible quarters.