ERTC (Employee Retention Tax Credit) Benefits for Home Healthcare Companies!
If you’re the owner of a home health care company, you may be wondering if you qualify for the Employee Retention Tax Credit. First of all, this is a specific question to your business and you shouldn’t assume your qualification based on other companies similar to yours. Scenarios that prove qualifying to one business may not apply to your business, even if you work within the same industry. Qualification rules can be extremely specific and can differ based on your geography, clients, and office set up.
It’s true that Home Health Care companies do well with the Employee Retention Tax Credit, for many of the same reasons. They do well with other tax credit programs such as the Work Opportunity Tax Credit; high turnover and lower compensation.
Home Health Care industry jobs are frequently first jobs for many employees, or it is a temporary job for many people who are looking for higher paying jobs in time while they work through training or accreditation programs. Many times the work can be completed by people who aren’t health care professionals, especially in the case of Companion Care Companies. This creates turnover in high numbers, with the median turnover rate in 2021 being 64.9% across all caregivers and leaving Home Healthcare providers to replace over half of their workforce every year on average. Combine that with the annual salary range for most Care Givers between $30,000 – $50,000, two facts become apparent: Caregivers, on average, make just enough money each year to maximize Employee Retention Credits for 2020 and to almost maximize 2021, and the annual employee population of wage earners can be over 150% of your employee population at any given time during the year.
Do Home Health Care Companies Qualify for the Employee Retention tax Credit?
This is an excellent question, and the answer is frequently yes. Every company must take care to make sure that their particular company qualifies for the Employee Retention tax Credit, but there are situations that the IRS describes explicitly in guidance publications that match with situations that Home Health Care companies dealt with. Here are just a few examples:
- Home Health Care professionals were unable to provide care to clients who resided in hospitals, elder care, or residential facilities during the pandemic, because they were barred from entry to these facilities due to government mandates.
- Home Health Care companies were barred from providing in-person evaluations to new and potential clients to determine their specific needs, and had a diminished ability to obtain new clients.
- Many Home Health Care companies lost a significant amount of revenue during Covid because people would work from home and could be there to care for their loved ones.
- The ability of Home Health Care agencies with staffing shortages to care for all of their clients was diminished, further resulting in loss of gross receipts.
Again, these situations may or may not apply to your business, but they are certainly areas to focus on when trying to determine if your business qualifies. A great place to look to see if your business qualifies is to read the IRS guidance. Check out this link to the News Release section of the IRS website, and read the Question and Answer section of Notice 2021-20 starting on page 17 to get plain language examples of situations that do and don’t qualify.
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