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There is no doubt about it: the medical industry was the one most impacted by the COVID-19 pandemic. Healthcare professionals put themselves at risk of contracting the contagious virus to care for patients, elective procedures were delayed and/or cancelled altogether and new patient safety standards had to quickly be implemented.
In addition to a revenue loss of roughly $200 billion for hospitals in the United States, the pandemic resulted in an approximately 60 percent decrease in outpatient services and an almost 50 percent increase in the cost of personal protective equipment (PPE). The financial hit was especially hard for providers of cosmetic and plastic surgery and those who perform non-invasive procedures.
To combat the sudden loss in revenue and maintain at least some patient volume, healthcare provider organizations were required to pivot to telehealth and other types of virtual consultations. Other providers made up for lost revenue by expanding their services to include new procedures or wellness programs.
Fortunately, there’s an available payroll tax credit of which eligible medical businesses can take advantage to improve the health of their bottom line: the Employee Retention Credit (ERC). Medical businesses that qualify for the ERC could potentially receive a check for up to $26,000 per employee in tax credits.
Example: Louisiana – March 12, 2020 – The Louisiana Department of Health ordered healthcare facilities to restrict visitors to those deemed “essential, vital, or necessary to the care and well-being of the patients, clients, and residents.”
Find More Government Orders Specific to Your State on Our Insights Page
To learn more about the Employee Tax Credit and how it might benefit your medical business, check out these FAQs:
How Does the Employee Retention Credit Benefit Businesses in the Medical Industry?
For How Long Is the ERC Available?
For How Much of a Tax Credit Might My Business Be Eligible?
For 2021, the ERC is a quarterly tax credit of 70 percent of the first $10,000 in wages per employee in each quarter of 2021 from January to September 2021 (capped at $7K per employee per quarter).
How Do I Know if My Medical Business is Eligible for the Employee Retention Tax Credit?
There are two main ways to be eligible for stimulus refunds:
- If your business matches the required decline in revenue within any quarter of 2020 or 2021.
- If you have W-2 employees.
What Exactly Is a Significant Decline in Gross Receipts Under the ERC Program?
How Do I Apply for the ERC?
How Can I Find Out Which COVID-19 Governmental Orders Were Enacted in the State Where My Medical Business is Located?
Is the Employee Retention Credit the Same as the Paycheck Protection Program (PPP)?
Applying for the Employee Retention Credit might not be as hard as performing surgery, but it can be confusing for even the most seasoned tax professionals. That’s why the talented StenTam team is available to guide you through the process. Contact us today to find out how you can claim the ERC with confidence!
Qualifying orders (From IRS)
What kind of government orders qualify my business or organization for the ERC? (added July 28, 2023)
To qualify for ERC, you need to have been subject to a qualifying government order related to COVID-19 that caused a full or partial suspension of your trade or business operations. The government order may be at the local, state, or federal level.
Examples of governmental orders:
- An order from the city’s mayor stating that all non-essential businesses must close for a specified time period;
- A state’s emergency proclamation that residents must shelter in place for a specified period, except for essential workers;
- An order from a local official imposing a curfew on residents that impacts the operating hours of your trade or business for a specified time period;
- An order from a local health department mandating a workplace closure for cleaning and disinfecting.
Can I rely on a recommendation, bulletin or statement issued by a government authority to qualify for ERC? (added July 28, 2023)
No. To qualify for the ERC, you must have been subject to a government order that fully or partially suspended your trade or business.
Recommendations or statements encouraging you to take certain actions are not orders.
If you use a third party to calculate or claim your ERC, you should ask them to give you a copy of the government orders – not a generic narrative about an order. Read the order carefully and make sure it applied to your business or organization.
Is being subject to a government order enough to make me eligible for ERC? (added July 28, 2023)
No. You need to demonstrate that the government order was related to COVID-19 and that it resulted in your trade or business being fully or partially suspended.
What does it mean to be fully or partially suspended? (added July 28, 2023)
Whether your business or organization was fully or partially suspended depends on your specific situation. For examples, see Notice 2021-20, Part III, Section D.
Some examples of who doesn’t qualify under this eligibility factor:
- If all your employees were able to telework during the pandemic and your business continued to operate, your business wasn’t suspended.
- If your customers were affected by a stay-at-home order, but no orders applied to your business operations, you weren’t suspended.
- If you voluntarily closed your business or reduced hours of operation, you weren’t ordered to suspend.
You could still qualify for ERC based on a decline in gross receipts even if you don’t qualify under suspension of operations due to government order.
Was my business or organization fully or partially suspended if I had a supply chain issue? (added July 28, 2023)
A supply chain issue, by itself, does not qualify you for the ERC.
The IRS provided a narrow, limited exception if an employer was not fully or partially suspended but their supplier was. However, it applied only when the employer absolutely could not operate without the supplier’s product and the supplier was fully or partially suspended themselves.
In addition to having the supplier’s governmental order, you will need to show that:
- The government order caused the supplier to suspend operations,
- You couldn’t obtain the supplier’s goods or materials elsewhere (regardless of cost), and
- It caused a full or partial suspension of your business operations.
Client Case Study
Like many medical companies across the country, a rural Texas-based clinic had make significant adjustments to their day-to-day as local and federal government orders mandated full and partial shutdowns. The...Read More
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