Are you a medical spa business owner trying to figure out how to retain your employees amidst the economic downturn caused by the pandemic? You’re not alone, and luckily, the federal government has created an Employee Retention Credit that could help.
This credit is specifically designed for businesses affected by COVID-19 and allows them to claim up to $26,000 per employee in wages they can use for retention purposes. In this article, we will discuss what eligible wages are qualified for claiming this credit, how to claim it correctly, and why it may be beneficial to use a professional when doing so.
Wages You Can Claim
Aggregation rules come into play, so businesses with a common owner must include all companies in their group when determining whether they meet these criteria.
You are eligible for qualified wages paid in quarters you experienced a 20% decline in gross receipts. For 2021, a 20% decline qualifies you for the credit too. You are also eligible if you experienced any type of shutdown or supply chain issues.
It’s important for medical spas to keep track of their gross receipts and number of full-time equivalent (FTE) employees throughout the year to ensure that they remain eligible for this credit. Knowing how many FTEs were employed during 2019 is also critical as it determines which wages are eligible for reimbursement.
Even if You Got PPP Loans
Even though you received a PPP loan, you still may be eligible to claim the ERC and benefit from its advantages. According to the Consolidated Appropriations Act (CAA) of 2021, businesses such as medical spas are able to do so, although they cannot double dip—wages paid that qualify for PPP forgiveness cannot be used in claiming the ERC.
However, if the PPP is not forgiven or if only a portion is forgiven, wages paid with unforgiven PPP proceeds can be used when calculating the amount of credit available through the ERC program. This means that if any portion of your PPP loan was not forgiven by the Small Business Administration (SBA), you can use those wages for qualifying expenses when figuring out your tax credits.
It’s important to note that this change applies retroactively, meaning it applies to all 2020 taxes filed after December 27th. It also means that if you’ve already filed your taxes for 2020 prior to receiving a PPP loan in 2021, you may still take advantage of this provision by filing an amended return and claiming your tax credit at that time.
Businesses who received two rounds of PPP loans are also eligible for the employee retention credit under certain conditions—namely that they didn’t use their first round of funds on qualified wages and can show proof of substantial decline in gross receipts compared to 2019 or 2020 numbers.
So even though you applied and received a Paycheck Protection Program (PPP) loan during 2020 or 2021, it doesn’t necessarily mean that you’re excluded from taking advantage of other financial assistance options like claiming an Employee Retention Credit (ERC). As long as some portion of your loan wasn’t forgiven by SBA or if none was requested at all, then there are still ways for you and other medical spas like yours to benefit from what this program has to offer.
Eligible Wages
Under the CAA, you can receive a credit for up to 70% of eligible wages paid between January 1, 2021 and June 30, 2021 – potentially granting you up to $14,000 per employee.
Eligible wages include bonuses or raises given to employees, contributions made towards employee health plans such as group health benefits and gross revenue from sales and services. However, employer contributions to employee health savings account (HSA) plans cannot be included in determining gross receipts.
For medical spas, this means that wages paid for furloughed employees are eligible for the Employee Retention Credit.
To qualify for the ERC, businesses must compare their current quarter’s gross receipts with either the corresponding quarter of 2019 or the prior calendar quarter’s receipts against its corresponding quarter of 2019; whichever provides more favorable results.
This is an important detail that medical spas should take note of when filing their tax returns as they may be able to benefit significantly from the additional credits available under CAA rules.
The ability to use bonuses or raises given out by employers as eligible wages is also another great perk offered by CAA that businesses should be aware of in order to maximize their deductions at tax time.
Businesses can now enjoy greater flexibility in how they structure their compensation packages while still being able to benefit from government-backed relief programs like Employee Retention Credit which have been designed specifically to help them stay afloat during these difficult economic conditions.
How to Claim the Credit
Claiming the Employee Retention Credit can be a great way to benefit your business financially, so make sure to take advantage of this opportunity. The fastest way to do this is by reducing quarterly 941 deposits.
Those who did not previously claim the credit, such as those ineligible due to PPP loan participation, can amend prior 941’s. Form 7200 can also be used for an advance payment, though those with more than 500 FTE employees cannot use this option. Alternatively, a refund can be requested via Form 941.
It’s important to remember that these credits are only available if wages were paid between March 12th and December 31st of 2020. Make sure you have all the necessary documentation ready before filing for the credit; it could save time in getting your funds back.
You may want to keep track of how much money is being saved through claiming the credit since it will count towards company taxes at year-end. If done properly, taking advantage of the employee retention credit can provide significant financial benefits for your medical spa business – just make sure to double check all requirements and keep track of any savings generated from claiming the credit!
Use a Professional
For complex situations, it’s best to consult a professional to ensure that you’re taking full advantage of the available credits. When dealing with medical spas and employee retention credits, there are numerous factors to consider when calculating the amount of credit due.
Professionals can help ensure that all applicable regulations are met and that no tax benefits are missed. This includes determining eligibility for each employee, as well as making sure all wages used for claiming purposes are properly documented and reported on tax forms.
They can provide guidance on how best to utilize both PPP loan forgiveness and paid sick leave credits in order to maximize savings for the practice. Moreover, ERC specialists can calculate calculations related to understanding whether or not claiming the credit is more advantageous than using wages for PPP loan forgiveness or paid sick leave credits.
They can also provide helpful advice in structuring contracts between employers and employees so that any applicable deductions or taxes owed are accounted for accurately. Furthermore, they have access to tools such as payroll systems which allow them to quickly analyze various scenarios and provide tailored advice accordingly.
Overall, consulting a professional is essential in understanding how best to leverage employee retention credits when operating a medical spa business. It not only ensures compliance with relevant regulations but it helps businesses make smart decisions about their finances by taking advantage of every available tax benefit possible.
Conclusion
You’ve now learned all about the employee retention credit for medical spas. You know what wages are eligible and how to claim the credit. Plus, you can still get this benefit even if you’ve received PPP loans.
It’s important to use a professional when claiming this credit, so that everything is done correctly and nothing gets overlooked.
To sum it up, this is a great way for medical spas to reduce costs and retain their employees during these difficult times. Don’t miss out on this fantastic opportunity – take advantage of the employee retention credit today!