Dental practices were hit especially hard during the COVID-19 pandemic. The effects of mandatory closures and hesitancy to be in such close proximity to a dentist or hygienist led to an average of a 17.9% drop in income in 2020, and many practices continue to struggle to get back to “normal.”

The Employee Retention Credit has been instrumental in providing dental practices with an influx of funds if they meet the eligibility requirements. If you had a substantial decline in revenue or your operations were significantly hampered by government regulations, you could be eligible to receive ERC funds.

What is the Employee Retention Credit?

The Employee Retention Credit is a payroll tax credit that falls under the umbrella of the Coronavirus Aid, Relief, and Economic Security Act — CARES Act for short. The CARES Act provided $2.4 trillion in stimulus money to help businesses and individuals stay afloat while the world was in shutdown mode.

The ERC specifically encouraged businesses, including dental offices, to retain employees even if a practice wasn’t running at full capacity. During this slow season, the office might have decided to engage in dental staff training, pursue continuing education, or enroll in personal development workshops. Or the office might have offered a brief sabbatical while keeping everyone on the payroll.

Claiming the tax credit is now possible, and you can receive up to $26,000 per employee. The funds are issued as a check for each quarter your practice qualifies.

How to Qualify for the ERC

There are two ways to qualify for the ERC:

1. Your practice revenue must have dropped by at least 50% from 2019 to 2020 and 20% from 2019 to 2021, or

2. You had to fully or partially shut down your practice in 2020 or 2021 to comply with a government order.

You do not need to have experienced both of these situations to qualify. If you were subject to either of these circumstances, you likely qualify for the ERC.

If you do qualify, the next step is to contact your accountant, tax preparer, or a service provider specializing in claiming the Dental Employee Retention Credit to file amended payroll tax returns.

ERC & PPC

In the early days of the Employee Retention Credit¹, dental practices that received a Paycheck Protection Program (PPP) loan were ineligible to claim the credit. However, that policy changed with the passage of the Consolidated Appropriations Act of 2021, which allows businesses to apply for and claim the ERC retroactively.

Even though you can still qualify for ERC despite receiving PPP funds, it’s important to note that if you qualified for loan forgiveness, you can’t use those wages toward your Employee Retention Credit. This practice is “double dipping,” and it can get you in hot water with the IRS.

For example, if you paid $100,000 in employee wages with forgiven PPP funds, you can’t claim those same wages when determining your ERC amount.

Pitfalls to Avoid When Claiming the ERC Credit

Perhaps the biggest mistake dental practices make is not applying for the ERC when they are eligible. Most dental practices are eligible.

Once a practice determines they are eligible, it is crucial that you work with skilled professionals who are familiar with the compliance issues and problems that can arise in calculating the ERC. Issues like double-dipping or overclaiming credit can lead to audits and having to pay the funds back.

There are also several rules that limit the amount of the credit, and not everyone is familiar with these rules. For example, the ERC is limited to 70% of qualified wages up to $10,000 per quarter. To make matters more complicated, the rules and dollar amounts change regularly.

The moral of the story is that you need someone trustworthy to help you apply for the ERC and receive maximum credit without overreporting. A mistake here can be catastrophic and not worth the risk.

Take the Next Step in Applying for the ERC

If you haven’t yet applied for the ERC, apply now. In the aftermath of the pandemic, many dental practices are learning how to deal with shortage of staff issues, and funds from the ERC can assist with staffing and retention.

Dental Intelligence can also give you the insights and automation you need to help with staffing shortages and reduce your overhead. Schedule a demo of our practice performance solution today.

Resources

¹ ADA