Don’t Miss Out On Valuable ERC Aid That Could Benefit Your Medical Or Dental Practice
Owners and providers of medical and dental practices throughout the State of Ohio surely remember the Spring of 2020 when Governor DeWine ordered healthcare organizations to be either fully or partially closed. It was a tough period for medical and dental practice owners during the COVID crisis – not to mention their employers and the patients who were in need of care. Even though we aren’t able to get the time we lost back, federal and state governments have worked to provide relief in the form of financial assistance and tax credits. The Employee Retention Credit (ERC), in particular, is proving to be an incredible source of relief as medical and dental professionals continue to seek out ways to return to normal and, most importantly, keep their doors open.
What Is The ERC?
The ERC is a refundable payroll tax credit for wages paid and health coverage provided by an eligible employer. For 2020, this is a business whose operations were either fully or partially suspended due to a COVID-19-related governmental order, or that experienced a 50% decline in revenue in a calendar quarter of 2020 when compared to the same calendar quarter in 2019.
This means that medical and dental practices, even if they didn’t experience the 50 percent decline in revenue, are still likely to qualify for the ERC – as they were ordered to close by “governmental order.” There are important considerations to be made when determining whether you qualify – and Rea & Associates’ PPP and ERC task force can help.
How Can Medical, Dental Practice Owners Benefit From The ERC?
The ERC, for most practices, pertains to qualified wages PAID during the period of time your practice was ordered to partially or fully close. In Ohio, medical and dental practices were ordered to shut down from March 19, 2020 through April 30, 2020. What we have found, is that for many, the first payroll that fell into the defined period was likely a regular, full amount of payroll. Furthermore, even after practices were ordered to temporarily close, shareholders and/or non-shareholder doctors, dentists, and other healthcare professionals and highly compensated employees were still receiving a paycheck during this period. Additionally, some practices paid a few key employees to report to work to help with emergency cases, make calls to patients, cover administrative responsibilities, etc.
The ERC can be used by practice owners to offset federal payroll tax deposits, including the employee Federal Insurance Contributions Act (FICA) and income tax withholding components of the employer’s federal payroll tax deposits, or refunded by amending the applicable quarterly Form 941 of 2020. For 2020, Eligible employers may claim a 50% tax credit of up to $5,000 per employee, for the year for qualified wages of $10,000, (qualified wages also include the cost to continue providing health benefits to the employee.)
For 2021, the credit has been changed to a 70% credit, or maximum of $7,000 per quarter for qualified wages. And the reduction of calendar quarterly revenues for 2021 is 20% when compared to the same calendar quarter of 2019.
In Ohio and most other states, medical and dental practices have not been ordered to shut down in 2021; therefore, to be eligible for the credit there would have to be a 20% reduction in revenue.
Will Your Medical, Dental Practice Qualify For The ERC?
I can’t stress this enough – there is a very good chance that your medical or dental practice will qualify to receive the ERC for the time practices were ordered to shut down in 2020. Also, you can still file for the ERC even if your 2020 income taxes have already been filed. Therefore, it’s absolutely worth it to reach out to your Rea advisor to claim your portion of financial relief, especially because of the nuances associated with the interplay between the American Rescue Plan, the Consolidated Appropriations Act, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and various sections of the Internal Revenue Code. Contact Rea & Associates today to see if your dental or medical practice qualifies for the ERC.
By Alan Hill, CPA (Mentor CPA Firm)