Written for Colorado Dental Association
By Kyle Morabito, Esq., Chief Legal Officer and Managing Director at Sagemont Tax
During the COVID-19 pandemic, almost every U.S. business was required to significantly change their operations to comply with governmental orders requiring them to implement COVID-related safety mitigation measures. In response, Congress provided for the Employee Retention Credit (“ERC”) under the CARES Act to reward employers for retaining employees. Unlike the Payroll Protection Program (“PPP”), the ERC is a cash credit from the IRS and there are no restrictions on how a business can use it.
Healthcare providers experienced some of the greatest impacts during the COVID-19 pandemic, but many have yet to realize the full potential of the employee retention tax credit.
Most dental offices were severely disrupted by COVID-19 restrictions. There are two ways for dental practices to find ERC eligibility.
1. Any dental provider or facility that faced a 20% or more decline in gross receipts in 2020 and 2021 could be eligible.
2. Any dental provider that had a greater than 10% restriction on business operations due to COVID-19 governmental orders may be eligible for ERC funds. Some specific restrictions placed on dental providers due to COVID-19-related governmental orders that lead them to qualify for the ERC include:
A major misconception that prevents employers in the dental industry from applying for the ERC is the belief that if they received PPP funds, they are ineligible for the ERC. While this was initially a limitation when the program was launched, it was removed in the Consolidated Appropriations Act of 2021, allowing employers to obtain both ERC and PPP funds. The only stipulation is that employers cannot obtain ERC for the same qualified wages paid by the PPP.
Timeline to Apply
Even though the tax credit technically expired in September 2021, qualified businesses can still amend filings for the ERC until 2025. Business owners must file IRS Form 941-X, which is used to make corrections to originally filed Form 941s. This can only be done up to three years after the initially filed payroll tax returns but there is no limit to how many times you can file an amended form.
The increasing popularity of the ERC has led to the proliferation of unqualified ERC service providers, the majority of which overcharge their clients and put them at risk of an audit. Additionally, payroll providers or in-house CPAs may believe common misconceptions due to not having full knowledge about the intricacies of the program, causing employers to miss out on significant returns.
To ensure accuracy and adherence to the complex ERC tax code, employers of dental offices should work with firms that are led by CPAs and tax attorneys with significant experience applying the financial and legal tests for ERC eligibility. With the right support, you can ensure your filing captures the total amount for all qualifying quarters and that all supporting documentation has been collected.
Sagemont Tax is an advisory group led by former big firm CPAs and attorneys that exclusively focus on the ERC. We have a proven track record of working with small and medium-sized businesses and nonprofit organizations. In addition, we are the only ERC provider in the country that has exclusive relationships with tax insurance brokers and providers to facilitate risk-free tax insurance policies.