The COVID-19 pandemic has brought challenges for healthcare practices, but it also led to the federal government passing several relief packages, including the Employee Retention Credit. The Employee Retention Credit is a payroll tax credit incentivizing practices to retain employees during the pandemic.
To qualify for the credit, your practice needs to demonstrate either a full or partial suspension of operations during any calendar quarter in 2020 or 2021 due to a government order, or a significant decline in gross receipts during any calendar quarter compared to the same quarter in 2019. Eligibility for the credit continues until the suspension due to a government order is lifted or until the significant decline in gross receipts reverses.
In Tennessee, healthcare practices that suspended non-emergency medical procedures due to Tennessee Executive Orders No. 18 and No. 25 are eligible to claim the credit for the period of March 24, 2020, through April 30, 2020 (extended through May 6, 2020, for dental service providers).
Previously, Paycheck Protection Program borrowers initially were not eligible to claim the Employee Retention Credit; however, this changed when Congress passed the Consolidated Appropriations Act in December 2020. The Employee Retention Credit can be received by borrowers that received a PPP loan or a Families First Coronavirus Relief Act credit; however, the credit cannot be applied toward the same wages.
Claiming the Employee Retention Credit for 2020
For 2020, a significant decline in gross receipts starts during the first quarter when gross receipts are 50% less than the same quarter in 2019.
The credit is up to 50% of qualified wages up to $10,000 per employee, with maximum credit for 2020 of $5,000 per employee. The credit can be claimed by amending Form 941 for the quarter that the credit is to be claimed, or by amending Form 941 for the fourth quarter of 2020 if a PPP loan was received.
The credit can be received as a refund check from the IRS after amending Form 941.
Claiming the Employee Retention Credit for 2021
For 2021, a significant decline in gross receipts starts during the first quarter when gross receipts are 20% less than the same quarter in 2019.
The credit is up to 70% of qualified wages up to $10,000 per employee; with a maximum credit per quarter in 2021 or $7,000 per employee. The credit can be claimed by amending Form 941 for the quarter that the credit is to be claimed or including the credit on the original Form 941 if not previously filed.
The credit can be received as a refund check from the IRS or by reducing future employment tax deposits. The Employee Retention Credit can provide a significant benefit for healthcare practices; especially as some practices continue to struggle during the COVID-19 Pandemic.
Please feel free to contact us at KraftCPAs with any questions or if you would like assistance with determining your practice’s eligibility for the Employee Retention Credit.
© 2021