Orthotown July/August 2020 - 34

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Because the landscape surrounding
COVID-19 and the related legislation is
always changing, tax regulation may have
changed since this article was written. As we
encourage throughout this article, be sure
to consult your CPA with any questions.
First, let's focus on the several new tax
laws that resulted from this pandemic.

Employee retention credit (ERC)
If you missed out on the PPP loans or
simply chose not to apply for that loan, you
should look to take advantage of the ERC
if you're eligible for it.
If a practice's gross receipts in a calendar
quarter fall below 50% of the same quarter
in 2019, or the practice was ordered to
partially or fully shut down by a government
authority, the credit can be applied for that
quarter in 2020.
Many practices will likely meet these
criteria for the second quarter of 2020.
If your practice is eligible, you can take
the credit for wages in each quarter until
you hit a quarter where your gross receipts
exceed 80% of the same quarter in 2019.
This provision expires December 31, 2020.
The credit is equal to 50% of up to
$10,000 in qualified wages per employee, to
a maximum credit of $5,000 per employee.
The credit works by reducing the amount of
payroll taxes that you would submit in the
quarter. Should a balance remain, it could
be refunded upon your request. (You would
have to file a form to ask for a refund.)
Also, to qualify for this credit, you
cannot have taken the PPP loan and you
cannot submit the same wages that were
eligible for a payroll tax credit under the
Family First Coronavirus Response Act
(FFCRA).

34

As an employer, you can also defer the
payment of FICA taxes you pay for your
employees. These taxes amount to 6.2% on
an individual's wages up to $137,700. Any
tax incurred between March 27, 2020, and
Dec. 31, 2020, will be considered timely
paid, provided that 50% of the tax is paid
by Dec. 31, 2021, and the balance is paid
by Dec. 31, 2022.
It should be noted that the federal
withholding taxes and the employee's share
of the FICA and Medicare tax must still be
submitted on time.

Retirement accounts
Another interesting development is that
you can take $100,000 from a retirement
account such as a 401(k), profit sharing,
or IR A account without the 10% early
distribution penalty (for those younger than
59½) and spread the income tax impact
over three years.
Not only could this give you an infusion
of cash, but it may also be a good opportunity to make some Roth IRA conversions,
especially if your taxable income ends up
being lower in 2020. However, if you return
the amount distributed within three years
of your first distribution, you can avoid all
income tax on the full distribution.

Other income tax tips
The FFCRA bill also corrected some
bad legislation from a couple of years ago
regarding qualified improvement property
(QIP). Congress had intended for QIP to
have a write-off period of 15 years, instead
of the normal 39 years; however, when
they passed income tax legislation a few
years ago, QIP remained as 39 years in an
unintended result.

The FFCRA fixed this and QIP is now
15-year property for years beginning in
2018. Therefore, you should consult with
your CPA about possibly amending your
2018 (and even 2019) income tax returns
to receive this benefit.
For employers with a Section 127 Tuition Benefit Plan (which allows employers
to cover up to $5,250 of an employee's
tuition expenses), the FFRCA also provided
that employers could include student loan
payments as one of the benefits under the
plan. This benefit plan generally excludes
owner-employees, which is why we don't
see many practices with it.
The Coronavirus Aid, Relief and Economic Security (CARES) Act also made
changes to net operating losses (NOLs)
whereby businesses with NOLs had the
option to carry these losses back to earlier
years. Before the CARES Act, you could
only carry them forward. This may provide

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