If your chiropractic practice has been impacted by COVID-19 (and whose hasn’t?!), you may want to check out the ERC Tax Credit for Chiropractors. Here’s why:
As of April 16, 2020, the SBA announced that there is no money left for chiropractors in the Paycheck Protection Program (PPP). The announcement certainly is not limited to doctors of chiropractic, as there are no applications being accepted at this time, for any small business due to the fact that the funds are currently exhausted. The Feds have mentioned the possibility of future funding, but naturally, this leaves a lot of chiropractors concerned about what to do next.
Even if you already applied or were sitting on the fence about the PPP or other disaster-related programs, a key issue is knowing when and how to use the funds to your advantage. As of this writing, the SBA has still not issued clear and additional guidance that helps business owners to accurately calculate the PPP forgiveness portion of the loan – which definitely makes it difficult for chiropractors (and other business owners) to make the best decisions for the health of your business. If you have not checked out our previous series on COVID-19 Disaster Relief Loans & Grants For Chiropractors, this may be a good time to do so – regardless of where you are in the process.
So, as we move forward in these changing times and uncertainty about the disaster loans, it makes sense to review the other options that may be available to the typical chiropractic practice.
One Good Alternative to the PPP – the ERC Tax Credit for Chiropractors
One such option that DC’s may want to explore is the Employee Retention Tax Credit (ERC) for Chiropractors. As we previously stated in our series on the PPP Loan, the timing of that loan is critical to obtaining maximum forgiveness and that timing should correlate with when and if your chiropractic practice opens or re-opens.
However, if reopening continues to be delayed and/or the PPP is no longer available, then the ERC represents an option for employers to receive a tax credit for wages that were paid during a quarter that was impacted by COVID-19.
The Basics About ERC Eligibility
The Employee Retention Credit is available to businesses that meet three basic criteria, which is why we believe you should review the ERC Tax Credit for Chiropractors:
- Your chiropractic business is fully or partially suspended for the period starting March 12, 2020, and ending December 31, 2020, due to COVID-19.
- Your practice experienced a significant decline in revenues in 2020 due to COVID-19. This is defined as 2020 gross revenues which are 50% or less than the same quarter in 2019.
- You paid wages to employees during these periods – other than yourself or family. Self-employed individuals or business owners (such as the owners of a chiropractic practice) and their family are NOT eligible for the ERC. So, for example, if you are a smaller practice that is literally a DC owner and your spouse – neither of you would be eligible for the ERC Tax Credit. On the other hand, if you had yourself, your spouse, and two staff members on the payroll AND were open during the dates above, you could be eligible to receive a tax credit for wages paid to the two staff members. Also, note that if your business was closed and no wages were paid to your employees (because they were laid off, you would not be eligible for the ERC Tax Credit – because you didn’t have any payroll taxes due to the fact that those employees were not unemployed).
How the ERC May Apply to Your Chiropractic Practice
Depending on the state you practice, if your chiropractic office was mandated to fully or partially suspend operates, you would likely be eligible for the ERC in Q1 of 2020 (and potentially other quarters as well) – assuming your revenues fell 50% or more as well.
Since the ERC is a tax credit and not a loan, you should speak to your tax advisor about how the ERC may apply to your chiropractic practice, given the criteria above. It will be applied against your taxes to be paid on Form 941.
The ERC is a tax credit of up to $10,000 in eligible wages. For more info on the Employee Retention Credit, see the IRS website here.
Additional Helpful Resources for Chiropractors During COVID-19
For chiropractors looking to sell or buy or chiropractic practice during COVID-19, there are some additional opportunities that you may want to consider — and it’s not all bad news! Check out our new video especially focused on how to handle buying or selling your chiropractic practice amidst coronavirus concerns.
For SELLERS –> If you are uncertain how COVID-19 would impact your practice sale and what to do next, check out our FREE video resource on How to Prepare Your Practice to Sell or Transition During Crazy Times!
For BUYERS –> If you are not sure if this is the right time to buy a practice due to COVID-19 concerns, check out our FREE video resources for you – Should You Be Buying a Chiropractic Practice in Crazy Times?