Practice owners who received grants and subsidies through the CARES ACT or other sources can finally see the light at the end of the tunnel. Here are the remaining steps to take in connection with these grants and subsidies.
PPP1 Loan Forgiveness:
Most practices received their PPP1 loans back in April or May 2020. They had 24 weeks to spend the money, and then 10 months from the end of the Covered Period to file for the PPP Loan forgiveness before payments would become due on the loan. The real deadline to file for the PPP Loan Forgiveness is the end of the loan term, which is 2 years for the early PPP loans that were paid out. When a practice owner files for forgiveness, any payments made towards the PPP loan would be fully refunded at that time.
While some of our clients filed for the PPP Loan Forgiveness on their own, others asked for our assistance. If you filed on your own, please email email@example.com to confirm:
- Whether your loan was fully or partially forgiven
- And whether you only reported payroll costs on the PPP forgiveness application or included facility costs in addition to the payroll costs.
We’ll need to know how you filed for your PPP1 forgiveness to be able to calculate the maximum Employee Retention Tax Credit (ERTC) that your practice is eligible to receive. (See below)
PPP2 Loan Forgiveness:
Most practices received their PPP2 loans in January or February 2021. That means the end of the 24-week Covered Period is right about now, and the PPP lenders have begun asking those PPP2 loan recipients to file for forgiveness. Generally, the same rules apply as filing for PPP1 forgiveness, and the deadline to file is 10 months after the end of the Covered Period.
If you filed with your lender for forgiveness on your own, please feel free to file the PPP2 application by yourself as well. If you’d like our help, the fee for practices that received less than $150k is $750, discounted to $500 if our firm handles the payroll for your practice. If you think you might be eligible for the ERTC for any quarter of 2021, you might qualify for a larger payroll tax credit if you have us complete the PPP2 loan forgiveness. To be eligible for the ERTC in 2021, your quarterly collections for any quarter in 2020 must be 20% lower than the same quarter of 2019.
Employee Retention Tax Credit (ERTC):
We have just started working through the calculations to see how much of an Employee Retention Tax
Credit your practice will be eligible to receive. This calculation is quite involved since the ERTC period and the PPP1 period overlap one another, and wages used for the PPP loan forgiveness must be excluded from the ERTC calculation. We have read through the instructions multiple times and have developed a few complex Excel spreadsheets utilizing Pivot tables to help us sift through your QuickBooks and Payroll data to do the math and come up with the highest allowable ERTC.
Here is the order that we will be making the ERTC Calculations:
- First batch: Practices using the online version of QuickBooks and also clients of our firm’s payroll service
- Second batch: Practices using QuickBooks Online who use another payroll service provider
- Third batch: Practices using the desktop version of QuickBooks
Our plan is to start by calculating the amount of the ERTC your practice is eligible to receive and email you that potential tax credit. You can then decide if you want us to move forward to prepare the paperwork to file for the ERTC.
Remember, the amount of the ERTC reduces the deduction you can claim for your payroll costs, causing most practice owners to repay about 40% of the tax credit received to the IRS and their home state.
Our fee to make the ERTC calculation and prepare the necessary paperwork will be $500 per employee for the first six employees included in the ERTC calculation, and then $250 per employee starting with the seventh employee eligible for the tax credit, capped at $7,500. $1,000 will be due at the time the Form 941-X is prepared by us, with the remainder due when you receive the tax credit.
Most practices owners, therefore, will be repaying about half of the Employee Retention Tax Credit they receive in taxes and fees. Please factor in these costs when trying to decide whether to have us prepare this paperwork for you to file for the ERTC.
Check out https://schwartzaccountants.com/2021/06/ertc-summary/ for our most recent blog post on the ERTC.
Provider Relief Fund Self-Reporting:
If your practice received a Provider Relief Fund Grant of more than $10k from HRSA, you are required to self-report that you utilized those funds properly. On 6/11/21, the Health Resources and Services Administration (HRSA) issued guidance available at: https://www.hhs.gov/sites/default/files/provider-post-payment-notice-of-reporting-requirements-june-2021.pdf.
For medical practices that received more than $10k prior to 6/30/20, the self-reporting period already commenced on July 1st and you need to complete the online application by 9/30/21. In August, we will be reaching out to our medical practice clients who received more than $10k in Provider Relief Funds prior to 6/30/20 to help fulfill this filing requirement. Our fee to assist with the HRSA Provider Relief Fund self-reporting is $500.
For those practices that received PRFs of more than $10k between 7/1/20 and 12/31/20, your self-reporting period starts 1/1/22 and ends 3/31/22. And the self-reporting period for practice receiving PRFs in excess of $10k between 1/1/21 and 6/30/21 commences on 7/1/22 and ends on 9/30/22.
You can access the Provider Relief Fund Reporting Portal at: https://prfreporting.hrsa.gov/s/. The first step is to register to set up your account. Please register using your email address as the username, but then use firstname.lastname@example.org as the contact email if you will be having us help you out with this self-reporting application. Our fee is $500 to assist with the self-reporting application.
Check out https://schwartzaccountants.com/2021/06/hrsa-provides-update-on-the-provider-relief-fund-prf-self-reporting-requirement/ for our most recent blog post on the HRSA Provider Relief Fund.
From IRS News – Edition IR-2021-79, April 8, 2021
WASHINGTON — The Treasury Department and the Internal Revenue Service today issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.
Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.
Where can businesses get food and beverages and claim 100%?
Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.
Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.
Various changes were made to the Child Tax Credit and Dependent Care Tax Credit for 2021, including:
- Dependent Care Expenses qualifying for the dependent care tax credit have increased from $3,000 to $8,000 for one qualifying child and from $6,000 to $16,000 for two or more qualifying children.
- The allowed dollar amount parents can fund into their pre-tax Dependent Care Benefit Plan through their employer Flexible Spending Account has been increased from $5,000 to $10,500 (if this change has been adopted by your employer).
- The Child Tax Credit, available to qualifying taxpayers based upon their income, has been increased from $2,000 per child under the age of 17 to $3,000 per child under the age of 18 or $3,600 per child for children under the age of 6. However, the income threshold for taxpayers to qualify for this tax credit has been significantly reduced from the 2020 income threshold.
- Qualifying taxpayers will begin to receive advance payments of the Child Tax Credit beginning in July 2021. The advance payments are determined based upon a taxpayer’s previously filed 2020 or 2019 tax return and who qualify for the child tax credit based upon the income reported on their most recently filed tax return (2020 or 2019). These advance payments will be paid monthly beginning July 2021. Qualifying taxpayers will be pre-paid from the US Treasury: 50% of their anticipated 2021 child tax credit ratably over the last 6 months of 2021 (maxed at $250 or $300 per child per month). The remaining 50% of the tax credit will be included the taxpayer’s 2021 filed tax return. Taxpayers can choose to opt out of the government pre-payments and “Unenroll from the Advance Payments” via the following IRS link: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.
More info about these expanded tax breaks for families is available at: 2021 Child Tax Credit and Advance Child Tax Credit Payments: Resources and Guidance.
Is your child working a summer job? If so, check out these basic financial planning tips:
- If you child’s wages will only be a few thousand dollars this summer, most likely he or she will not be subject to federal income taxes. The standard deduction for single filers in 2021 is $12,550. Earned income less than this base amount is not subject to federal income taxes. Thus, if your child expects to earn less than the standard deduction this year, does not have significant investment income, and owed no taxes in the prior year, then write “Exempt” in the space under line 4(c) on the W-4 Employee’s Withholding Certificate. If claiming “Exempt”, then no federal income taxes will be withheld from your child’s paycheck – leaving more money in their paycheck each week.
- Having earned income will allow your child to fund a Roth IRA. The maximum amount allowed to be contributed to a Roth IRA in a year is the lesser of your child’s wages (earned income) or $6,000. The primary benefit of the Roth IRA is TAX-FREE growth of the investment being held in this IRA! Funding a Roth IRA at an early age will not only benefit your child with tax free growth over a longer time horizon until retirement age; but will also help to teach your child the importance of saving a portion of their income at a young age and developing good financial planning habits. Additionally, the Roth IRA contribution can be funded by parents (or grandparents) as a gift to your child; but must be funded into an IRA under your child’s name.
- Don’t pass up on a great opportunity to teach your child budgeting and financial management skills. Open a savings account at your bank for your child that will be funded each week with a set percentage or set dollar amount of each paycheck received. Teaching the importance of building a small “nest egg” to be used for college or other personal expenses at a later date (books for school, a first car, entertainment, etc.) will teach your child the value and responsibility of earning a regular paycheck and saving a portion for future financial needs. Perhaps consider adding a “parent matching component” to entice your child to save more – for every dollar they add to their savings account, you add 50 cents to their savings account as well.
- Finally, if there are taxes withheld from your child’s W-2, he or she will want to file a tax return as most likely the withheld taxes will be refunded back to your child. The IRS offers free e-filing on their website for taxpayers with an income less than $72,000. The IRS link to free e-filing is found at https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
If your practice received a Provider Relief Fund Grant from HRSA of more than $10k, you are required to self-report that you utilized those funds properly. On 6/11/21, the Health Resources and Services Administration (HRSA) issued guidance available at: https://www.hhs.gov/sites/default/files/provider-post-payment-notice-of-reporting-requirements-june-2021.pdf
The table below summarizes the deadline to use the funds as well as the reporting time period. Please note that most of our clients received the Provider Relief Fund (PRF) subsidy between 7/1/20 and 12/31/20. Some medical practices received their PRF Subsidy between 4/10/20 and 6/30/20.
Grant recipients will self-report data in the following order:
- Interest earned on PRF Payments – if the funds were held in an interest-bearing account
- Other assistance received – including PPP loans, state grants, and other COVID related assistance
- Use of PRF subsidies – not reimbursed by other grants received
- Break down of expenses between General and Administrative and/or other Health Care-Related Expenses
- Lost Revenue Reimbursement – unallocated PRF money can be applied to lost revenue
You can access the Provider Relief Fund Reporting Portal at: https://prfreporting.hrsa.gov/s/. The first step is to register to set up your account. If we’ll be filing the self-reporting application for you, please let us register on your behalf as we will use a common email address for each client. Our fee will be $500 to assist with the self-reporting application. Please email email@example.com to let us know if you want our help with this.
For additional info, the Provider Relief Fund (PRF) Reporting Portal FAQs are available at: https://hrsac19.my.salesforce.com/sfc/p/#t00000004XgP/a/t0000001FId8/wN.4dTa.NRiNhwh_0CBblH6gvvedhqOt7_.5OS7rP6U
The Employee Retention Tax Credit (ERTC) has had quite a journey since first being introduced as part of the CARES Act last March. Originally, business owners who took the PPP Loan weren’t eligible for this valuable payroll tax credit.
That all changed in December when Trump signed his stimulus package into law. Suddenly, anyone who received a PPP Loan could ALSO amend their 941 payroll tax forms to receive the ERTC, provided their practice was either closed due to a government mandate or saw its revenue in a 2020 calendar quarter decrease by 50% or more from the same quarter of 2019. Practice with a decrease of 20% of more in a 2021 calendar quarter as compared to the same quarter in 2019 also qualify. Most of our healthcare clients qualify for the ERTC.
Biden made the ERTC even more valuable when he signed the March 2021 stimulus bill into law.
For a summary of the current set of ERTC rules:
Applying for the ERTC is pretty complicated. For starters, you will need to go to your QBO to see which quarters you qualify for this payroll tax credit. You will then coordinate the wages you claim for this credit with the minimum amount of wages utilized for the PPP Loan Forfeiture application. Lastly, you need to prepare and file Amended 941 Forms, which is a payroll tax form filed quarterly with the IRS.
We’ll be reaching out to our clients soon to offer assistance with filing for the Employee Retention Tax Credit. If you would like our assistance to file for the ERTC, please email us at firstname.lastname@example.org.
On March 11, 2021, President Biden signed the $1.9 Trillion American Rescue Plan Act of 2021 into law. ARPA included a provision expanding the Employee Retention Tax Credit (ERTC) to include “Recovery Startup Businesses (RSB)” – those that opened after 2/15/20 with annual revenue of less than $1 Million.
The ERTC for RSB’s is only available for Q3 and Q4 of 2021 and is equal to 70% of the first $10k paid to each employee per quarter, capped at $50k per quarter. And unlike established businesses, an RSB does not need to show a decrease in revenue or being impacted by a government shutdown to qualify.
It appears that eligible startup businesses will claim this valuable tax credit just by checking a box that will be available on their Q3 and Q4 quarterly payroll tax filing Form 941. The IRS recently issued guidance for this valuable payroll tax credit at: https://www.irs.gov/instructions/i7200.
Just a reminder that if your practice had a 401k/Profit Sharing Plan in place during 2020, you are required to file a Form 5500 by 7/31/21 (https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2019-sf.pdf). If you aren’t able to submit this paperwork prior to 7/31, please file for an extension using the Form 5558, https://www.irs.gov/pub/irs-pdf/f5558.pdf, giving yourself until 10/15 to file.
There are no taxes due with this form. Instead, the 5500 is an informational filing only. Practices with SEPs and SIMPLEs are exempt from this annual filing requirement.
While no taxes are due, the PENALTIES FOR FILING THE FORM 5500 LATE ARE DISGUSTING – A WHOPPING $250 PER DAY!!! Learn more at: https://www.irs.gov/retirement-plans/increased-penalties-for-failure-to-file-retirement-plan-returns.
As a practice owner with a retirement plan, it’s up to you to follow up with your TPA to be completely sure that all the filing deadlines are met. No one is certain how flexible the IRS will be to reduce or waive this onerous late filing penalty. Please do what you can to not need to find out.
Remember, no one cares more about your practice avoiding this $250 per day late-filing penalty than you do.
Taxpayers who received unemployment benefits during 2020 could exclude the first $10,200 of benefits received from their taxable income as long as their total income reported on their tax returns was less than $150,000. This rule wasn’t enacted until March causing eligible taxpayers who filed their returns prior to mid-March 2021 to miss out on this tax break. More info on this opportunity is available at: New Exclusion of up to $10,200 of Unemployment Compensation | Internal Revenue Service (irs.gov)
If you paid federal taxes on up to $10.2k of 2020 unemployment benefits that should have been tax-free, please hold off amending your tax return at this time. Instead, as stated on the IRS website:
“Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.
For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.”
Therefore, no federal amended tax return is necessary. However, if your reduction in taxable unemployment benefits impacts other tax credits, you will need to amend your federal tax return. Please contact your tax preparer if you received an automatic federal refund for the unemployment exclusion to confirm whether there is any additional impact on your federal taxes. Additionally, your tax preparer can follow up with your specific state’s rules to determine if amending your state income tax return may be necessary.
With regard to this refund, if a taxpayer’s bank information is included on the 2020 federal tax return, then the refund will be paid via direct deposit. Otherwise, a check will be mailed to the taxpayer’s address per the tax return filed for 2020. Additionally, taxpayers will receive a notice from the IRS explaining the adjustments.
If you have filed your tax return and are waiting on your refund, you can get an update on the status of the processing of your federal tax return by going to the IRS link: https://www.irs.gov/refunds and clicking on the Check My Refund Status button.
Be prepared to provide the following information:
- Your social security number
- Your filing status
- Your exact refund amount
Once input, this link provides the status of whether or not your federal tax return has been processed and if so, the anticipated date of refund or the date the refund was sent. The IRS updates this site once daily.
Taxpayers can also check on the status of their recently filed amended returns as well using this link https://www.irs.gov/refunds