Between the impending tax payment deadline, a new government administration and the ever changing circumstances presented by Covid-19, there’s been a lot of financial uncertainty for US businesses recently, both big and small. Last week, The IRS posted information on its website detailing that businesses like medical and dental practices that didn’t receive forgiveness on PPP loans in 2020 can instead claim the Employee Retention Credit (ERC) for the final quarter of 2020, and the first two quarters of 2021 thanks to a provision in last month’s coronavirus stimulus package. This is an important detail that could make a huge difference to health care businesses this tax year.
Roger McCloud, CEO of Iron Tax, Accounting, and Financial Solutions, says this is a golden opportunity for medical businesses. “The tax credit allows small businesses like medical and dental practices to claim $7,000 per employee per quarter in 2020, which adds up quickly”. He adds: “For example, a company with 36 qualified employees would save more than $1 million but many likely will miss the opportunity and could pay hundreds of millions in avoidable taxes.”
McCloud has outlined five reasons why many may miss out if taxes are not handled with extra care or with the help of a tax professional this year.
Covid has hit businesses hard this year and many are looking to save on unnecessary costs as much as possible. This may mean foregoing accountancy fees and attempting to file taxes themselves. But unfortunately, tax laws change quickly and even tax savvy bookkeepers don’t have the expertise and industry knowledge that a qualified accountant does. It may seem cost effective to skip the professional rates, but in the long term it may end up costing businesses millions.
Application for PPP Loan Forgiveness Rejected
Many small businesses would have taken a hit when they were rejected for PPP loan forgiveness and if they haven’t studied the changes carefully, they may not be aware they can still claim the ERC. The announcement could mean more than $200,000 for a business with 10 employees – meaning figures in the hundreds of millions for thousands of healthcare practices across the US.
Second Draw PPP Eligible
For the small businesses that are eligible for the second draw Paycheck Protection Program (PPP), owners may think that it disqualifies them from the ERC. That’s not true, and for many businesses, their payroll is large enough to allow an employer to qualify for both. Now is not the time to make assumptions during such a complicated tax year, another reason why you should have a professional give you peace of mind and catch details like this.
No Significant Decline in Gross Receipts
Some small business owners may assume that since they haven’t seen a significant decline in gross receipts, they don’t qualify for ERC. However, if the business had operations that were fully or partially suspended then they could still qualify. Even if your business has been more financially comfortable during the pandemic than some of the worst hit industries, you are still completely entitled to the help available.
Only Small Companies Qualify
Many business owners erroneously think that only companies with fewer than 100 employees qualify for the 2021 ERC. This myth has been fueled by negative media coverage of larger companies who received PPP loans. But again, this is spreading disinformation and the number of employees a business has is not one of the tests to qualify.
Give yourself peace of mind this year by investing in a professional to save thousands in return.
Roger McCloud is the CEO of Iron Tax, Accounting and Financial Solutions. Find out more information here.