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Employee Retention Credit

By Reuben Lewis IV, President of National Financial Planning Group

Connect with Mr. Lewis on LinkedIn or contact him by email or phone at (480) 542-8787.

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Digital Exclusive - Fall 2021

 

CONNECTION TO MEDICAL PRACTICES

 

Thanks to the CARES Act, eligible businesses that retained employees during the COVID-19 pandemic are currently able to claim the Employee Retention Credit (ERC). That includes medical practices whose operations were reduced or revenue that declined during the pandemic.

 

The ERC is a refundable tax credit for qualified wages paid in 2020 and 2021. For 2020, the credit is 50% of up to $10,000 in qualified wages paid per employee in 2020. That means eligible businesses can receive a credit of up to $5,000 per employee for last year.

 

For example, if you paid qualified wages to an employee in Q3 and Q4 2020 of $8,000, the tax credit is $4,000. If you paid qualified wages to an employee in Q3 and Q4 2020 of $14,000, the tax credit is capped at $5,000.

 

For 2021, the tax credit is 70% of up to $10,000 of qualified wages for each employee for every qualifying quarter in 2021. For example, if you paid qualified wages to an employee in Q1 2020 of $8,000, the tax credit is $5,600. If you paid qualified wages to an employee in Q1 2021 of $14,000, the tax credit is capped at $7,000.

 

ELIGIBILITY

 

So, which businesses are eligible? Most private sector businesses that carry on a trade or business are eligible for the ERC. The qualifications are:

  1. Your business had operations that were partially or fully suspended during any calendar quarter in 2020 or 2021 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or

  2. Experienced a significant decline in gross receipts during the calendar quarter of 2020 or 2021 (the significant decline threshold is 50% for any quarter in 2020 and 20% for any quarter in 2021)

 

Even if you received a PPP loan in 2020, your company is still eligible as long as it qualifies based on the factors above. However, wages paid via the PPP funds will be exempt from the ERC.

 

The COVID-19 pandemic has been tough on Arizona’s physicians. To learn more and claim your credit, contact National Financial Planning Group at reuben@nationalfinancialplanninggroup.com or (480) 542-8787.