If an employee has paid health insurance through their paycheck this is included in the analysis.
"Section 2301 of the CARES Act allows a credit (employee retention credit or credit) against applicable employment taxes for eligible employers, including tax-exempt organizations, that pay qualified wages, including certain health plan expenses, to some 2 or all employees after March 12, 2020, and before January 1, 2021." (pp. 1-2)
"Section 2301(c)(5)(B) of the CARES Act provides that “wages” include amounts paid by an eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Code), but only to the extent that the amounts are excluded from the gross income of employees by reason of section 106(a) of the Code." (p. 9)
Q. 29: How is the maximum amount of the employee retention credit available to eligible employers determined?
A. 29: The credit equals 50 percent of qualified wages (including allocable qualified health plan expenses) that an eligible employer pays in a calendar quarter. The maximum amount of qualified wages (including allocable qualified health plan expenses) taken into account with respect to each employee for all calendar quarters in 52 2020 is $10,000, which means that the maximum credit for qualified wages (including allocable qualified health plan expenses) paid to any employee in 2020 is $5,000. (pp. 51-52)
There is much more info on health plan expenses in the notice if you or the client need it.
"Section III.D. of Notice 2021-23 provides the rules related to the maximum amount of an eligible employer’s employee retention credit for the first and second calendar quarters in 2021. The employee retention credit equals 70 percent of qualified wages (including allocable qualified health plan expenses), and the amount of qualified wages (including allocable qualified health plan expenses) taken into account with respect to any employee is limited to $10,000 for any calendar quarter, for a maximum credit of $7,000 per employee for each of the first and second calendar quarter of 2021." (p. 6)
"In general, qualified wages are limited to wages as defined in section 3121(a) of the Code and compensation as defined in section 3231(e) of the Code, with certain modifications relating to the inclusion of qualified health plan expenses and, for calendar quarters in 2021, remuneration paid for services to certain governmental employers." (p. 21)
"Section 2301(e) of the CARES Act, as explained in section III.L. of Notice 2021- 20, and section 3134(e) of the Code provide the general rule that an employer's deduction for qualified wages, including qualified health plan expenses, is reduced by the amount of the employee retention credit..." (p. 24)
"Under section III.L. of Notice 2021-20, a reduction in the amount of the deduction allowed for qualified wages, including qualified health plan expenses, caused by receipt of the employee retention credit occurs for the tax year in which the qualified wages were paid or incurred..." (p. 24)