On December 27th, President Trump signed the $900 Billion Stimulus Package into law that included a provision allowing practices to claim the Employee Retention Tax Credit (ERTC) even if that practice had received a PPP Loan. The Stimulus Package also increased the amount of this tax credit and made qualifying easier.
Most healthcare practices should be eligible for this payroll tax credit for at least the period 4/1/20 – 9/30/20. Please remember that wages paid with PPP funds or reimbursed through FFCRA aren’t included as part of the ERTC calculations.
You determine if your practice qualifies for this valuable credit on a quarter by quarter basis.
For 2020 – Maximum annual credit of $5k per eligible employee:
- To first qualify for the ERTC during 2020, your practice either needed to close due to a government orders or see its revenue fall by 50% for a calendar quarter as compared with the same quarter of the prior year.
- You continue to qualify until the first day of the quarter following the quarter that collections exceed 80% of the collections for the same period of 2019.
- For each quarter you are eligible, you can take a payroll tax credit equal to 50% of the first $10k of eligible wages paid per employee for the calendar year.
For 2021 – Maximum annual credit of $14k per eligible employee:
- This tax credit has been extended through 6/30/21.
- You are eligible for either of the first two quarters in 2021 that your collections fall more than 20% as compared to the same quarter of 2019 (or you can base eligibility on the preceding quarter as compared with that same period from 2019).
- For each quarter in 2021 that you are eligible, you can take a payroll tax credit equal to 70% of the first $10k paid per eligible employee per quarter.
You will apply for this payroll tax credit in connection with your quarterly payroll tax filings. Hopefully guidance will be issued soon. Later this year as the rules are released, we plan to help our clients figure out how to best coordinate the PPP loan forgiveness with the ERTC to maximize the subsidies your practice will receive.
Additional Resources from Forbes:
Breaking Down Changes To The Employee Retention Tax Credit In The New Covid Relief Bill, Part 1 (forbes.com)
Breaking Down The Changes To The Employee Retention Tax Credit In The New COVID Relief Bill, Part 2 (forbes.com)