Are You Eligible for the Employee Retention Credit?

There has been considerable confusion surrounding the Employee Retention Credit and whether employers may be eligible for the credit. This confusion exists because the rules have changed several times since the CARES Act passed early in the pandemic. This video should help chiropractic physicians determine if you may be eligible.

Remember, this is only information to help you get started, as your payroll accountant or service provider will ultimately assist you in that process.

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Important Notes: The IRS changed the rules to allow companies who previously received PPP funds to use the ERC. Additionally, although the ERC program ended in September 2021, employers can file AMENDED RETURNS to take advantage of the credit for up to 3 years following that date (i.e. September 2024).

If you would like a tool to help determine if you may be eligible for the ERC, use this form to help with the calculations.

Transcript:

We wanted to make our members aware of a potential tax credit that may be available to you and go through some of the particulars that surround this particular credit. So, the credit began early on with the Cares Act early on in the pandemic, and it is called the Employee Retention Credit. Now, it hasn’t gotten a whole lot of press after the initial release, because it did not allow you to take that credit if you were getting PPP funds, and many of our doctors did go the PPP route. However, that restriction has been removed. That opens up the possibility to be able to take advantage of this particular credit. Now, this is a credit against payroll taxes. So at the end, what you’re going to hear me say is, you’re going to want to get with your tax accountant, with your payroll company, if you will, or the person that handles your payroll, because they’re going to be the ones that help you navigate and submit amended returns for payroll in order to take advantage of the credit if you’re eligible.

Now, here’s where we’re going to start. First of all, I want to talk to the owners of their practices that have small practices, maybe single physician practices, or only employ family members. For you, this is probably not going to be an option, because there is an exclusion for owners of 50% or more of the companies are greater than 50% of the companies, and so if you are the sole owner, and you only employ family members, then it would be problematic. Now if you employ those that are not family members in your practice, then you may be eligible. And that’s where the eligibility kicks in. So I want to cover that first.

Now, second is this and this is key, there are two ways to become eligible for the employee retention credit. The first you won’t be eligible for any of our doctors, because we were considered essential during the early and currently even of the pandemic challenges the pandemic. So as an essential business at that stage, then you become ineligible to meet the first criteria, which really dealt with the direct impact from a governmental order. But because of your nature of being essential, then it rules you ineligible for that particular provision. However, there’s another provision that deals with revenue. And I apologize, I know this is this can be confusing, but I’m trying to hit all the highlights and give you enough information to help you make your next best decision. So the revenue side of this is really important, we begin to look at quarter by quarter 2020 versus 2019, and 2021 versus 2019, or the quarter that immediately preceded it. There are two different sets of rules for this first in the 2020 portion, you have to look at each quarter to determine Did you have a 50% reduction in gross revenue and revenues versus the same quarter in 2019. If that happens, then you definitely will want to have a conversation with the person that helps you with your payroll, their processes your payroll to find out if they can help you with the next steps on how to achieve that credit.

Now 2021, the rules changed. At that stage, it allows for a 20% reduction, or if your revenues were only 80% of what they were either in 2019 or in the quarter that immediately precedes the quarter that you’re looking at. Then at that stage, you would be eligible in that quarter for the tax credit. Now if you’re wondering, okay, so Marc, what’s the financial impact of this particular tax credit? Well, it depends on which quarters that you would be eligible for the tax credit. It also depends on your employment level, or how many employees, full-time employees, and how much you paid them during those particular quarters. Here’s how it ultimately works, the maximum amount that it would be worth is $26,000 per employee. That’s if you’re eligible clear through 2020 and clear through 2021. So 2020 as looked at kind of as a whole for the last three quarters 2021 is looked at in each individual quarter or year 2020 eligible credit would be approximately $5,000 per employee for the entirety of that 2020 time period. However, the 2021 goes quarter by quarter and potentially has as much as $7,000 per quarter per employee.

So the biggest thing is this if you are if you employ others who are not family members, if you had a significant reduction in your overall revenue That’s 50%, and 2020, or in any individual quarter in 2021, a 20% reduction or 80% of the revenues from either 2019 or the immediately preceding quarter, then you may be eligible and it’s worth having that conversation with the accountant with a company that helps you process your payroll because this is a payroll tax credit. There’s a lot of factors that go into this, there is an offset with PPP, but it doesn’t make you ineligible because you can also include health benefits and other potential benefits and pay. So you want to make sure that you really get this right contact, the people that help you handle your payroll to find out if you’re eligible for the employee retention credit. Hopefully, this helps you out and we will catch you next week.