Employee Retention Tax Credit
As many of you are aware the Employee Retention Tax Credit has been one of the main topics of discussion these past few weeks. We would like to take this opportunity to provide a brief description outlining the details of the ERTC.
Please know that we are working very diligently to determine which of our clients qualify and will amend the 2020-941’s that are within the discussion. We will be working to apply these tax credits to your 2021 tax return. Below you will find some of the components that explain the inner workings of this Tax Credit.
What Dental Practices Qualify for the ERTC For 2020:
- If your practice realized a 50% or greater reduction in gross receipts in any calendar quarter of 2020 as compared to the same calendar quarter in 2019 (this is most likely the second quarter as this is when most of your practices were either completely closed or open only to take care of emergency procedures).
- If your practice was ordered to shut down either in whole or in part
due to an “order from an appropriate government agency”.
Qualification if you were under a “Government Order” to shut down…
- Must be an actual government order (and not a recommendation).
- Recommendations made by the American Dental Association and the Center for Disease Control do not count.
- If the government order is a qualified government order, the order to shut down does not have to be a total order to shut down. For example, if the order says that dentists in a county or city are considered essential to provide emergency treatment only, since the non-emergency part of most of your practices is a substantial part of your business, then this is a partial shutdown that qualifies you to take the credit as long as the non-emergency services you provided were at least 10% of your total gross receipts and the hours of service of employees who provided suspended services are at least 10% of the total hours worked by your employees.
- If a supplier of your business that is essential to the operation of your business is shut down, you could qualify. Dental suppliers to the best of our knowledge were not shut down-it was just that there was not enough supply of PPE early in the pandemic.
How Do You Calculate the Credit Amount?
- The credit is calculated by taking 50% of qualifying wages.
- Qualified wages are basically wages paid to your employees. Wages do not include wages paid under the Qualified Sick Leave and Family Leave rules of the Code (you are receiving a full tax credit for those elsewhere).
- You can include amounts paid through your dental practice group health plan
- For most dentists, if you qualify under the 50% reduction rule this will be wages paid during the second and third quarter of 2020.
How Do You Claim the ERTC FOR 2020?
- You will file an amended Form 941 likely for the second and third quarters of 2020.
- You will eliminate all of your Federal employer FICA and Medicare taxes you paid for that quarter and the excess will be refunded to you.
You may already be on our list of qualifying practices, should you feel you should be included, please contact Maria at email@example.com.
Your GPA team.