Are you a dental practice owner? If so, the federal government has created a tax credit designed just for you – the Employee Retention Credit (ERC).
Let’s explore what ERC is, if dentists are eligible for it, how to qualify as a dental practice, and what you need to apply.
Let’s get started!
What is ERC?
The ERC was established as part of the Coronavirus Aid, Relief and Economic Security Act, or CARES Act.
It’s designed to refund eligible dental practices for keeping their employees on the payroll in 2020 and 2021 by providing a tax credit of up to $5,000 per employee for the period of March 13-Dec. 31, 2020, and $7,000 per quarter and per employee between the period of Jan. 1-Sept. 30, 2021.
Eligible employers can claim this credit on their federal employment tax returns using Form 941X. To be eligible for ERC, dentists must meet certain criteria such as having experienced a certain reduction in gross receipts in 2020 or 2021 OR have had operations shut downin any way due to government orders related to COVID-19.
If you meet these criteria and would like more information about how to apply for ERC credits for your dental practice employees, you should apply today! When it comes to keeping your employees happy during tough times like these, taking advantage of ERC could be just what you need.
Are Dentists Eligible?
You may qualify if your dental practice has seen a significant dip in revenue or was forced to close due to COVID-19. The Employee Retention Credit (ERC) is available for those who meet certain criteria:
- To be eligible, the practice must have experienced a decline of 20% in gross receipts in any calendar quarter of 2020 or 2021 compared to the same quarter in 2019.
-If the practice did not have a decline in receipts, they could qualify if they were either fully or partially suspended due to government order related to COVID-19 during any of these quarters. These suspensions also include reduced capacity and operation hours. Another eligiblilty relates to supply chain and vendor disruptions.
The size of the employer, wages paid to employees, and other factors may restrict eligibility.
This credit could provide much-needed support for your business as long as you’re able to qualify and meet all applicable requirements. Careful consideration should be given when evaluating whether or not your dental practice qualifies for this opportunity as there are many rules and regulations that come with it.
Understanding these guidelines will help you decide if taking advantage of the ERC is right for you and your business while ensuring that all paperwork is completed properly so that you receive the maximum benefit possible from this program.
How to Qualify as a Dental Practice
To qualify as a dental practice for the Employee Retention Credit, you must demonstrate a decrease in gross receipts compared to the same calendar quarter of 2019. For 2021, this means that gross receipts must be more than 20% lower than it was in 2019. Gross receipts include anything from investments like dividends and interest, rents, royalties, and annuities.
Income recognition is based on tax accounting methods. There are four separate calculations for the Employee Retention Credit available to dentists: 2020 ERC (which has a maximum credit of $5,000 per employee); 2021 Quarter 1 ERC (max credit of $7,000 per employee); 2021 Quarter 2 ERC (max credit of $7,000 per employee); and 2021 Quarter 3 ERC (max credit of $7,000 per employee). All these credits are reported on Form 941-X for their respective quarters.
It’s important to note that there are different criteria depending on when you’re claiming the credit – 2020 requires you to prove more than a 50% decline in gross receipts OR a shutdown order, while 2021 only requires more than 20%. This can be difficult to determine if your practice experienced fully or partially suspended operations due to orders from an appropriate governmental authority due to COVID-19. In those cases, you’ll need to look at what your business was doing before those orders were implemented and compare it with what it was doing after they were lifted.
In order to maximize your savings through this program, it’s important that you understand not just how much money you’ll be eligible for but also when and how you should file your claim with the IRS. You’ll want to make sure that all paperwork is filed accurately according to deadlines so that everything matches up correctly and there’s no delay in receiving payment from the IRS. Additionally, make sure that any qualified wages paid during applicable periods are properly documented as required by law before filing claims with the IRS.
Determining whether or not your dental practice qualifies for an Employee Retention Credit depends largely on understanding both eligibility requirements and documentation needed for submission purposes, so it’s important that you do thorough research ahead of time to ensure maximum savings without any potential delays or penalties from the IRS.
What You Need to Apply for ERC
The ERC application process requires businesses to provide a variety of information, so it’s essential to be prepared beforehand in order to maximize savings without any potential delays.
One of the main pieces of information that dental practices need to provide is their number of full-time employees across all associated organizations with an Employer Identification Number (EIN). This includes full-time employees for 2019 as well as the wages for each employee, by pay period, for the period covered by the PPP loan(s).
Additionally, government mandates must be considered when applying for the ERC; dentists should collect all company locations where government orders may have caused partial shutdown and document them accordingly.
Gross receipts need to be provided for each qualifying quarter in 2019, 2020 and 2021. Furthermore, if PPP loans were taken out then all documents related to those loans must also be submitted in order to identify what expenses can be used for forgiveness.
It’s important that dentists are able submit all documents accurately and on time in order to receive maximum benefit from this program.
Finally, it’s important that dentists ensure they have copies of 941 payroll returns from both 2020 and 2021 ready before submitting their application. Doing so will help guarantee a smooth application process that could potentially save thousands of dollars over time through this tax credit program.
Therefore, it’s essential that business owners take care when collecting and organizing all of this information before applying for the ERC.
Conclusion
You’ve learned a lot about the Employee Retention Credit for dentists. If you run a dental practice, you’re likely eligible to apply for this credit. The best part? It’s relatively easy to qualify, and the application process is straightforward.
Now that you know how to get started, it’s time to look into taking advantage of these tax savings. With a little bit of effort on your part, you can make sure your business remains competitive in today’s market and increases its profitability.