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From labor shortages to supply chain difficulties and increased wage demands, COVID-19 made business difficult for many small to mid-sized-business (SMB) owners in America.
The pandemic put extreme stress on the healthcare system in the United States, with workforce shortages, burnout, exhaustion, and trauma – not to mention government restrictions and a subsequent drop in revenue for many businesses.
Luckily, relief may be available for many eligible businesses.
The ERC – also called the Employee Retention Tax Credit (ERTC) – was designed to help qualifying small and medium-sized businesses that, in part, experienced financial strain due to COVID-19 with important payroll tax refunds.
Several acts signed into effect in 2020 including the Coronavirus Aid, Relief, and Economic Security (CARES) Act provide incentives for SMBs across sectors such as construction, healthcare, manufacturing, social assistance, retail, and many more.
Originally, the ERC was not accessible to business owners who claimed PPP (Payroll Protection Plan) – which was the first measure rolled out by CARES Act. However, the Consolidated Appropriations Act made it possible for businesses to qualify for the ERC, even if they claimed a PPP loan.
What is An Eligible Employer?
While Innovation Refunds does not provide tax or legal advice, and you should consult a tax professional regarding your specific business needs, to qualify for the ERC, a company must have (generally) suffered financial loss, disruption to their business, or government restrictions – but kept their employees on payroll.
Examples of government restrictions:
If the employer’s business experienced fully or partially suspended by government order due to COVID-19 during the calendar quarter, or experienced partial shutdowns, then it may qualify. For example, healthcare organizations faced restrictions on medical office activities, including prohibiting access to hospitals and limiting the ability to perform elective procedures (e.g. A medical practice that had capacity restrictions on its waiting room during the pandemic).
Examples of financial loss:
The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, it no longer qualifies after the end of that quarter.
How Much You Can Claim through the ERC Funding Program?
The amount you can claim through the ERC funding program depends on your employee headcount, the year(s) you’re claiming for, and whether your employees were full-time. Here are some guidelines:
2020 ERC: A credit of 50% of the wages paid – up to $10,000 per employee from March 12 – December 31, 2020.
2021 ERC: A quarterly tax credit of 70% of the first $10,000 in wages per employee in each quarter of 2021 from January to September 2021 (up to $7,000 per employee per quarter or 70% of $10,000).
How Businesses Like Yours Are Utilizing the ERC Funding
Due to a lack of awareness and changes in the funding regulations, the ERC remains largely unclaimed.
The healthcare and social assistance fields (physicians, dentists, and family care in particular) are likely some of the top SMB sectors to have not claimed the ERC. In fact, it’s been estimated that up to 225,000 businesses in this field have yet to claim it.
Here are a few ways healthcare and related companies can utilize ERC funding:
- Rewarding employees
- Building out your benefits program
- Launching new products
- Acquiring other businesses
The possibilities are endless. With the ERC, qualifying companies could receive a refund to help cover rising training costs, offer competitive employment incentives, and expand services.
Keep Employees on Payroll
You already kept employees on payroll during the pandemic. Now qualifying companies can potentially keep more employees on the payroll longer with a capital injection from an ERC refund.
Reinvest the ERC Funds to Hire New Staff Members
As we mentioned above, the odds are your staff could be overworked and under stress.
For example, many hospitals reported critical staffing shortages over the course of the pandemic, particularly when case numbers were high. In fact, during the Omicron surge in January and February 2022, the 7-day average of hospitals reporting critical staffing shortages peaked at 22% during mid-January 2022.
The Health Resources and Services Administration’s (HRSA’s) Bureau of Health Workforce (BHW) estimates, for instance, that by 2025, 37 states are projected to have a shortage of primary care physicians. Plus, pay grades have risen in the medical field. The median salary for nurse practitioners has increased 16% year-over-year as of 2023.
Is it time to hire new staff members – or retain the existing ones you have? If eligible, the ERC refund could help.
During the pandemic, some businesses were forced to borrow more to keep operations running, as large parts of the economy slowed or shut down.
As a business owner, you know that too much debt will inhibit your ability to create a cash surplus. Plus, if you eliminate debt, you’ll pay less in interest over time.
Invest in New Equipment
There are tons of great reasons to upgrade your equipment – new technology, improved efficiency, lowered maintenance costs, and becoming equipped for new procedures so you can provide better patient care.
Opening in New Locations
One way to grow your business is geographically. If you qualify, you could use the ERC to scale to new locations, renovate existing locations, or other methods of expansion.
There’s Still Time to Apply to the ERC
No matter what industry your business is in, it could benefit from the ERC if it is eligible. Check my business' eligibility today.