Employee Retention Credit Calculator 

 November 20, 2023

By  Jace W Campbell, CPA

Employee Retention Credit Calculator

The Employee Retention Credit (ERC) might seem like a complex concept, with its many intricacies and specifications… But in essence, it’s a fully refundable tax credit designed to encourage businesses to keep employees on their payroll during periods of significant decline in gross receipts or full/partial suspension of business operations due to government orders. Yes, it could fill dozens of pages if we delved into all its nitty-gritty details… but for now, we’ll focus on giving you the gist of it…

Qualifying for the ERC

Now let’s discuss how businesses can qualify for the Employee Retention Credit… According to IRS guidelines, two main criteria determine eligibility: experiencing a significant decline in gross receipts and having your business operations fully or partially suspended due to government orders related to COVID-19. It’s also important to note that these requirements differ depending on whether you’re applying for credits in 2020 or 2021…

Navigating the Decline in Gross Receipts

When it comes to qualifying for the Employee Retention Credit based on a significant decline in gross receipts, the process can be quite intricate… You are required to show that your gross receipts for a particular calendar quarter were less than 50% (for 2020) or 80% (for 2021) of what they were for the same quarter in 2019. Now, let’s break down this concept further…

Gross receipts, for most businesses, equate to gross revenue… That’s all income from whatever source derived, including sales (net of returns and allowances), service revenues, interest income, dividend income, rental and royalty income and so on. The IRS does not specifically define gross receipts because it encompasses more than just ‘sales’. Therefore, any kind of income would typically be included in this calculation…

The qualification criteria are straightforward: If your gross receipts in either Q1, Q2 or Q3 of 2020 were less than half (50%) of the corresponding quarter in 2019, then you meet the threshold to qualify… However, if we look at Q4 of 2020 or any quarter in 2021 and your gross receipts were less than 80% of what they were during that same quarter in 2019 – then you also qualify. This might seem confusing since we’ve now incorporated Q4’20 into the latter scenario…

The reason behind this seemingly convoluted requirement lies within a safe harbor election defined by the IRS… This provision allows businesses to claim additional quarters if they meet certain criteria. It’s clear that lawyers had their hands on this part of the code because it has been made slightly more complicated than necessary..

Also read: IRS Rules for the Employee Retention Credit

Another key point is that not only does the percentage decrease differ between credits claimed for 2020 and those claimed for 2021 – but how your qualifying period can change after experiencing a decline in gross receipts was also adjusted… This emphasizes the importance of keeping track of your quarterly gross receipts and being mindful of the requirements for each respective year.

Navigating through these requirements might seem daunting, but understanding the intricacies and maintaining an organized record of your business’s gross receipts can significantly simplify the process… And remember, you’re not alone in this journey – there are resources available to assist you.

Business Operations Suspended Due to Government Orders

The Employee Retention Credit also allows for qualification based on the suspension of business operations… Now, this isn’t just about closing your doors temporarily. Rather, it’s about proving that your business was affected by government orders limiting commerce, travel, or group meetings due to COVID-19.

For the suspension of business operations criteria, you’d need to answer several key questions:

1. What governmental orders required you to suspend your operations?

2. Did that suspension of operations result in a more than nominal impact on your business?

3. For what dates were the governmental orders in effect and more than nominally impacting you?

This criterion is particularly relevant to industries such as restaurants… For instance, every restaurant in the US with indoor dining experienced a period where governmental orders restricted their indoor dining capacity – even if they had orders requiring them to separate tables by six feet. If this modification reduced their number of available patrons, they could still qualify…

However, the suspension doesn’t have to be complete – even partial suspensions can count… This means businesses that were able to continue some level of operation but had restrictions affecting normal activities might still qualify.

In March 2021, IRS Notice 2021-20 provided further clarity on what constitutes a “suspension of operations.” They introduced over a dozen examples detailing various scenarios under which businesses might or might not qualify depending on their specific circumstances…

So let’s say, for example, if you operate a gym and you were ordered by the government to close your premises for a couple of months due to COVID-19 related concerns… That would typically constitute more than a nominal impact – especially when considering businesses like gyms rely heavily on customer footfall and direct physical interaction.

Deciphering these complex requirements can indeed be challenging… but having an understanding and awareness of how they apply to your specific situation is crucial in determining whether you qualify for the Employee Retention Credit. With these pointers in mind, you can take a more informed approach towards this aspect of the ERC.

Lies and Deceptions About ERC Qualification

It’s essential that while navigating through this process, you remain wary of certain lies and deceptions some firms might use to lure you into signing up… Remember that knowledge is power – understanding how the ERC works is your best defense against misinformation.

Exploring Further with JWC ERTC Advisory CPA

In your journey of understanding the Employee Retention Credit, you may encounter challenges… That’s where JWC ERTC Advisory CPA comes in. With their team of experts, they can help ensure that you’re navigating the ERC process correctly and ethically, safeguarding your interests and those of your employees.

The IRS Crackdown on ERC Fraud

The IRS has recently stepped up its efforts to curb ERTC fraud. They are cracking down on firms promoting fraudulent claims for these credits, making it even more crucial for businesses to seek guidance from trusted and reputable sources when exploring their options for the ERC…

Engaging JWC ERTC Advisory: Benefits & Assurance

Lastly, let’s consider why engaging JWC ERTC Advisory would be a smart choice… In times filled with uncertainty and fear about tax credit claims – especially amid increasing IRS crackdowns on fraud – working with an experienced and ethical firm like JWC offers not only peace of mind but also potential gain.

In conclusion, while the Employee Retention Credit offers substantial benefits for qualifying businesses, it’s important to approach it with a solid understanding and ethical guidance. Whether you’ve previously filed for ERTC or are just beginning to explore this option, remember that you have resources available to help navigate this complex process – most notably, JWC ERTC Advisory CPA.

Jace W Campbell, CPA

Jace founded JWC ERTC Advisory CPA in March 2021 as the nation's first and only public accounting firm focused solely on ERC . . . and nothing else. He has personally signed over 9,000 ERTC claims and is proud to be executing these claims conservatively, and how intended by Congress.

He has a passion for educating clients so they can make the best decision for themselves.  If you read articles and watch videos that Jace produced in 2021, his approach is the same now as it was then.

While other firms pivot their messaging to comply with new IRS guidance, Jace continues preaching the same conservative principles that have helped clients recover hundreds of millions . . . while sleeping easy at night.

related posts:

Can You Claim Employee Retention Credit in 2023?

Can You Claim the Employee Retention Credit in 2022?

Employee Retention Credit Scams: What You Need to Know

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