ERTC Update

For starters, the American Rescue Plan Act of 2021 (“ARPA”) extended the ERTC (Employee Retention Tax Credit) through the end of 2021.  Practice owners that haven’t fully recovered to 2019 revenue levels might now be eligible for a tax credit of $7k per non-family employee per quarter, which translates to $28k per employee for 2021.

As we explained in our January 4th blog post available at https://schwartzaccountants.com/2021/01/employee-retention-tax-credit-ertc-updates, to be eligible for the ERTC:

 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 $28k per eligible employee:

  • This payroll tax credit for 2021 has been extended through 12/31/21.
  • You are now eligible for any quarter in 2021 that your collections fall by 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.
  • The credit for the first two quarters of 2021 is taken against your staff’s Social Security taxes, while the credit for the last quarters of 2021 is taken against Medicare taxes. Claim Advance ERTC payments on a Form 7200 (https://www.irs.gov/forms-pubs/about-form-7200)

 We also explained in another January 4th blog post available at: https://schwartzaccountants.com/2021/01/ppp-update/ how to prepare a report on your QuickBooks Online to see if you meet the required reduction in quarterly collections.

 Our plan is to help our clients file for the ERTC starting right after the 5/17/21 extended personal tax filing date. Our fee is $500 per eligible employee per quarter. Additional fees apply if we need to amend your 2020 practice and/or personal tax returns.  If you would like our assistance filing for the ERTC, please email us at practicehelp@schwartzaccountants.com.

Other ERTC Rules – IRS Issues Notice 2021-20: Guidance on the Employee Retention Credit:

In short, the current rules require that employers looking to claim the ERTC must amend the applicable 2020 quarterly payroll tax filings (Form 941) and must also reduce the deduction claimed for their staff salaries on their 2020 practice tax return by the amount of the credit. You can read all 102 pages of this IRS Notice at: https://www.irs.gov/pub/irs-drop/n-21-20.pdf.  Here are some highlights:

  • No deduction allowed for wages included in ERTC Calculationa similar deduction disallowance applies under section 2301(e) of the CARES Act with regard to the employee retention credit, such that an employer’s deduction for qualified wages, including qualified health plan expenses, is reduced by the amount of the employee retention credit.
  • Family members don’t count: wages paid to related individuals may not be taken into account for determining qualified wages for the employee retention credit.
  • No Credit for Schedule C Income: Self-employed individuals are not eligible for the employee retention credit with respect to their own self-employment earnings. However, a self-employed 21 individual who employs other individuals in the self-employed individual’s trade or business and who otherwise meets the requirements to be an eligible employer may be eligible for the employee retention credit with respect to qualified wages the self-employed individual pays to the employees.

Lastly, the IRS Notice (on page 87) details how to file for the ERTC for wages paid in 2020 as follows:

An eligible employer that received a PPP loan and did not claim the employee retention credit may file a Form 941-X for the relevant calendar quarters in which the employer paid qualified wages…[employers] should not use a subsequent Form 941 to claim an employee retention credit for qualified wages paid in the second quarter of 2020.

Please note that calculating the ERTC goes hand in hand with filing for the PPP Loan forgiveness. The rules seem to imply that you can re-figure the allowable payroll costs for the ERTC calculation even if you offset 100% of the PPP Loan with payroll costs for the forgiveness calculation.  See examples starting on page 73 of the IRS notice at: https://www.irs.gov/pub/irs-drop/n-21-20.pdf.

Lastly, unlike other subsidies offered during the past 12 months including the PPP Loans and HHS Provider Relief Funds that provided relatively short windows to apply for those subsidies, practice owners eligible for the ERTC have 3 years to file an amended payroll tax form – 941-X.

Our plan is to help our clients file for the ERTC starting right after the 5/17/21 extended personal tax filing date. Our fee is $500 per eligible employee per quarter. Additional fees apply if we need to amend your 2020 practice and/or personal tax returns.  If you would like our assistance filing for the ERTC, please email us at practicehelp@schwartzaccountants.com.

Additional EIDL Advance Funds May Be Available

As we wrote in February at https://schwartzaccountants.com/2021/02/additional-eidl-advance-funds-may-be-available/, the SBA has started reaching out to inform practice owners who didn’t receive the full $10k EIDL Advance last April that they might be eligible for an additional grant now.  To qualify for the Targeted EIDL Advance, your practice must be located in a low-income community per the map available at: https://sbaeidl.policymap.com/app and you need to demonstrate a 30% reduction in revenue for an 8-week period beginning 3/2/20 or later. Plus, you need to wait to be contacted by the SBA to apply.

If you have been contacted by the SBA by email regarding additional EIDL funds available, please read through our blog post or check out what the SBA posted about the new Targeted EIDL Advance at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/covid-19-economic-injury-disaster-loans.

Businesses Can Temporarily Deduct 100% of Meals As Of 1/1/21

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.

Still No Update By HHS On The PRF Self-Reporting Requirement

We checked the Provider Relief Fund (PRF) Reporting Portal Frequently Asked Questions (FAQs) available at:

https://hrsac19.my.salesforce.com/sfc/p/#t00000004XgP/a/t0000001FId8/wN.4dTa.NRiNhwh_0CBblH6gvvedhqOt7_.5OS7rP6U

We found no updates on when you need to comply with the PRF self-reporting requirement.

Reporting Questions 

  1. How can I report on the use of funds? 

Providers will be notified when they should complete the second step of the process and report on the use of funds. This functionality is not currently available. You will be able to log into the PRF Reporting Portal at https://PRFReporting.hrsa.gov  hen the system is ready for providers to start reporting on the use of funds. 

  1. When will I be able to begin reporting on the use of funds? 

The operability of the PRF Reporting Portal for reporting on use of funds has been delayed. HRSA will announce the timeline for submission of these reports when it is available. 

  1. How will HRSA communicate to providers when the PRF Reporting Portal is open for the submission of reports on the use of funds? 

HRSA will communicate via broadcast email to the email address that was provided during registration. Providers can also check the Reporting Requirements and Auditing webpage for the latest updates about the PRF Reporting Portal available at: https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/reporting-auditing/index.html

MASS Finally Conforms With Federal Rules For PPP Loans and EIDL Advances

During March, Massachusetts passed legislation to make PPP Loan Forgiveness and EIDL Grants not taxable to Massachusetts business owners. Other grants, including the those issued by the MGCC or the HHS, continue to be taxable for federal and Mass taxes.

According to the Mass Department of Revenue at:  Tax Filing Season Frequently Asked Questions | Mass.gov:

PPP Loans:

Loan forgiveness income is excluded from gross income for personal income taxpayers for 2020 under An Act Financing a Program for Improvements to the Unemployment Insurance Trust Fund and Providing Relief to Employers and Workers in the CommonwealthSubsequently, the Consolidated Appropriations Act of 2021 (CAA 2021), provided that PPP loan recipients may deduct expenses paid for using PPP loan amounts, even if the PPP loans are ultimately forgiven.

EIDL Advance:

EIDL grant amounts are not taxable for personal income taxpayers, including unincorporated businesses reporting income and expenses on Schedule C, partners in a partnership, and individual shareholders of an S corporation. Recently passed Massachusetts legislation excludes EIDL grant amounts awarded pursuant to Section 1110 of the CARES Act or Section 331 of the Economic Aid Act for 2020 for taxpayers subject to the Massachusetts personal income tax. Therefore, personal income taxpayers do not need to report these amounts. Whether you are subject to the personal income tax or the corporate excise, if your expenses are deductible on your federal return, they are also deductible on your Massachusetts return.

Other Grants:

Federal law requires that grants to businesses be included in gross income.  The IRS has specifically stated that if governments use CARES Act Coronavirus Relief Fund payments to establish grant programs to support business, businesses receiving such grants must include the grant amount in their federal gross income.  Because these grants are taxable under federal law, they are also taxable under Massachusetts law. 

Anyone who filed their 2020 Massachusetts tax returns reflecting the PPP loan or the EIDL Advance as taxable income can amend their tax returns to have those taxes refunded.  Please reach out to your tax preparer if you think your 2020 Mass returns might have picked up PPP loans or EIDL Advances as taxable income.

Need Help With Locum Tenens Providers?

During the pandemic, we’ve often been asked for advice on finding qualified providers. We highly recommend using Barton Associates.

Barton Associates, founded in 2001 and headquartered in Massachusetts, connects hundreds of practices each month with qualified healthcare providers. Their vast database of providers includes physicians, dentists, nurse practitioners, physician assistants, CRNAs, and psychologists/iatrists. Having such a large pool of providers allows Barton Associates to supply a qualified candidate with any state license needed.

Barton’s 1:1 approach means that throughout the entire process you will have a single point of contact. This strategy positions them to build the strongest possible relationship with you.

Most facilities, like yours, typically use expert locum tenens providers to manage a wide variety of healthcare staffing challenges, such as:

• Covering urgent needs because of vacancies, vacations, illnesses, or planned leaves of absence (e.g., maternity or sabbatical leave) among permanent staff.
• Supplementing existing staff during unanticipated or seasonal spikes in patient volume.
• Providing stopgap coverage while recruiting a permanent provider.

Barton is equipped to help you fill your short- and long-term assignments, no matter the situation. Partnering with Barton Associates means you’ll never be left to figure things out alone. They give you a dedicated account manager that’s with you every step of the way helping to:

• Quickly and efficiently find qualified candidates. Barton recruiters are trained to proactively recruit for new providers, meaning our database grows daily.
• Obtaining additional credentialing or state licensing when necessary.
• Obtaining comprehensive medical malpractice insurance coverage.

It’s your account manager’s core responsibility to find the best candidate that matches your organization’s staffing needs. They review CVs, conduct initial interviews, and check references, so you don’t have to.  All you have to do is review the candidates and choose the best fit for your practice. Barton also handles travel and housing, helping to get your new provider to work as quickly as possible.

To learn more about locum tenens staffing through Barton Associates, visit bartonassociates.com/clients. Simply fill out the form or give them a call to be connected with The Locum Tenens Experts®.

PPP Updates for Small Practices and Sole Proprietors

More changes were made to the PPP program. First, the deadline to apply is extended to May 31st. If you are self-employed or own a small practice, consider applying for a PPP loan. Remember, the PPP loan is FREE MONEY, and should NOT need to be repaid and should NOT be subject to federal income taxes.

A second change deals with how much PPP money self-employed individuals can receive. Under the revised PPP rules, you will base the maximum PPP loan on your Gross Collections as reported on your Schedule C. Previously, the calculation was a function of your net Schedule C income. Either way, the max you can receive remains at $20,833, with the calculation now based on gross revenue capped at $100k.

More info is available at: https://mdtaxes.com/2021/03/ppp-formula-enhanced-for-sole-proprietors-earning-less-than-100k/

Please visit the SBA website for more details at: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Recap of Changes to Tax Deadlines

For INCOME TAXES:

  • The due due for personal income tax returns has been extended to 5/17/21
  • Request for automatic six month extension, Form 4868, is required to be filed by 5/17/21 unless you will submit your tax returns by then
  • 1st quarter 2021 estimates are still due 4/15/21

For FINANCIAL PLANNING and RETIREMENT:

  • Due date for funding your 2020 Roth or Traditional IRA, or Education Savings Account (ESA) has been extended to 5/17/21
  • Due date for self-employed individuals to fund their retirement plans has been extended to 5/17/21
  • Self-employed individuals who need additional time to fund a retirement plan can file a Form 4868 with the IRS by 5/17/21

IRS Extends Additional Tax Deadlines for Individuals to May 17, 2021

From IRS News – IR-2021-67, March 29, 2021

The Internal Revenue Service today announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15, such as making IRA contributions and filing certain claims for refund.

This follows a previous announcement from the IRS on March 17, that the federal income tax filing due date for individuals for the 2020 tax year was extended from April 15, 2021, to May 17, 2021. Notice 2021-21 provides details on the additional tax deadlines which have been postponed until May 17.

Time to make contributions to IRAs and health savings accounts extended to May 17

In extending the deadline to file Form 1040 series returns to May 17, the IRS is automatically postponing to the same date the time for individuals to make 2020 contributions to their individual retirement arrangements (IRAs and Roth IRAs), health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Coverdell education savings accounts (Coverdell ESAs). This postponement also automatically postpones to May 17, 2021, the time for reporting and payment of the 10% additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans. Notice 2021-21 also postpones the due date for Form 5498 series returns related to these accounts to June 30, 2021.

Estimated tax payment due April 15

Notice 2021-21, issued today does not alter the April 15, 2021, deadline for estimated tax payments; these payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

Updates regarding tax relief as a result of the COVID-19 pandemic can be found at IRS.gov.

President Signs Third Stimulus Package

Last week, President Biden signed the most recent government stimulus bill, the American Rescue Plan Act of 2021.  This $1.9 trillion stimulus package was passed with hopes of speeding up an economic recovery due to the Pandemic.  Two key elements of the bill focused on addressing unemployment benefits and issuing a third stimulus payment for qualifying taxpayers.

With federally assisted unemployment benefits set to expire the week of March 14, this bill extends the subsidized program until the week of September 6.  People collecting state unemployment benefits and Pandemic Unemployment Assistance (PUA) will continue to receive the additional federal unemployment assistance of $300 per week in addition to the state unemployment benefit for an additional six months.

Furthermore, for the 2020 tax year, taxpayers can exclude their first $10,200 of unemployment benefits received in 2020 from their taxable income on their tax return.  To qualify, the taxpayer’s modified adjusted income on the tax return must be less than $150,000.  For joint filers, each spouse will separately qualify for the $10,200 exclusion.  As of now, this exclusion is for tax year 2020 only.  This exclusion is only for federal taxes and each state will need to determine if they will allow the exemption as well.  For taxpayers that have already filed their 2020 tax return and qualify for this exclusion, an amended tax return can be filed to claim the benefit.

A third round of stimulus checks is also part of the package.  Beginning the weekend of March 13, the government began sending out stimulus checks in the amount of $1,400 per person.  This special payment is not income but is an advance payment of the 2021 Recovery Rebate Tax Credit to be included on taxpayers’ 2021 federal tax returns.  The prior two stimulus checks excluded dependents over the age of 16.  Stimulus checks being sent under this bill include all dependents listed on a taxpayer’s tax return – children over the age of 16 as well as parents and others that qualify as dependents for a taxpayer.

Phase out of the checks are based upon filing status and income levels:

  • For a single filer the income phase-out range is between $75,000 – $80,000
  • For a joint filer the income phase-out range is between $150,000 – $160,000
  • For a head of household filer the income phase-out range is between $112,500 – $120,000

The income threshold for taxpayers will be based upon the 2020 tax return, if already filed.  If the 2020 tax return has not been filed yet then then the threshold will be based upon the taxpayer’s 2019 tax return.  If your income is above the phase-out range in 2020 but below the range as reported on your 2019 tax return, then you should consider delaying your 2020 tax return filing until your stimulus check is received.

If the IRS has a taxpayer’s bank info from a prior tax return, the payment will be via direct deposit.  Otherwise, a check or debit card will be sent to the recipients.  Taxpayers can check the status of their stimulus payment by going to the following IRS link: Get My Payment | Internal Revenue Service (irs.gov)