Finances and Taxes

Your Employee Retention Credit Calculator for 2020 and 2021: How to Determine Your ERC Amount

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The Employee Retention Credit (ERC) was created by the federal government to help ease the financial hardship caused by the COVID-19 pandemic on small businesses. Employers who are eligible for ERC, can receive tax credits in exchange for qualified wages and health plan expenses paid to (and on behalf of) employees. But once you determine that you’re eligible for ERC, how much can you expect to claim as credit? Luckily, we’ve got this handy ERC Calculator to help you figure out the credit amount you can expect. In this post we’ll walk you through how to use it to calculate your ERC amount for 2020 and 2021.

Determining ERC eligibility

This is a complicated one, so we put together a whole post on how to determine whether you qualify for ERC for 2020 and 2021. Head over there to evaluate your status. Once you know you are eligible, you can get to work on calculating your credit (which we walk you through in this post).

Calculating your 2020 ERC

Let’s start with 2020. For 2020, qualified wages and expenses are capped at $10,000 per employee for the year and the credit is up to 50 percent of that amount, so you can claim up to $5,000 worth of credits per employee (again, for the entire year). To figure out exactly how much you can claim, use the calculator! 

1. Go to the Calculator.

2. Click File > Make a Copy at the top right hand of your screen. Now you have your own version of the calculator.

3. Click on the tab at the bottom that is labeled 2020.

4. First, you want to determine the eligibility of your business for ERC within that quarter. The calculator can help with this, and this post walks you through precisely how to do it. 

5. Only change values in the light grey cells; do not change any of the values in the cells that are white, because those cells contain formulas, and altering the formulas will cause your calculations to result in errors. The content that appears in the light grey cells is simply example content, feel free to alter it to values relevant to your business.

6. Once eligibility is determined, scroll down to the ERC Credit Calculation section and start entering qualified wages and health plan expenses. Here are a few things you should know:

For 2020, Q2 qualified wages and expenses include those paid out between March 13, 2020 and June 30, 2020Q3 qualified wages and expenses include those paid out between July 1, 2020 and September 30, 2020Q4 qualified wages and expenses include those paid out between October 1, 2020 and December 31, 2020

The following are restrictions on wages that qualify for ERC: 

a) You cannot include wages paid with PPP or EIDL as qualified wages

b) You cannot include wages paid out to employees who are related to the business owner as qualified wages

c) You cannot include wages that have already been claimed for WOTC or any other tax credit as qualified ERC wages

7. Add your inputs to the grey cells, and let the calculator do the work!

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Calculating your 2021 ERC

In 2021, the opportunities for ERC increase. Unlike in 2020, when ERC is calculated in aggregate for the year, in 2021, you calculate each quarter separately. In 2021, qualified wages and expenses are capped at $10,000 per quarter and the credit amount can be up to 70 percent of those wages/expenses. This means that you can claim up to $28,000 worth of credits per employee for the year. Turn again to the trusty ERC calculator to work out how much you should be claiming in credits. Here’s how. 

1. Go to the Calculator.

2. Click File > Make a Copy at the top right hand of your screen. Now you have your own version of the calculator.

3. Click on the appropriate tab at the bottom of the spreadsheet. For 2021, here are the time periods that correspond with each quarter:

Q1Q2Q3Q4
January 1 – March 31April 1 – June 30July 1 – September 30October 1 – December 31

4. Don’t forget to work out your eligibility before starting your ERC calculation.

5. Remember that you should only change values in the light grey cells; do not change any of the values in the cells that are white, because those cells contain formulas, and altering the formulas will cause your calculations to result in errors. The content that appears in the light grey cells is simply example content, feel free to remove and alter it to values relevant to your business. 

6. Scroll down to the Employee Retention Credit Calculation section and start entering  qualified wages and health plan expenses.

Also, the same restrictions for qualified wages apply in 2021: 

a) You cannot include wages paid with PPP or EIDL as qualified wages

b) You cannot include wages paid out to employees who are related to the business owner as qualified wages

c) You cannot include wages that have already been claimed for WOTC or any other tax credit as qualified ERC wages

7. Enter employee names, wages and health plan expenses. Your credit amount will appear at the bottom of the column marked Credit. That’s it! 

Want to know about the Employee Retention Credit? Check out the full ERC Guide here

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Updated: July 14, 2021

Gusto Editors
Gusto Editors
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