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Pandemic Hurt Physicians But PPP And Tax Credits Can Help

Big drops in patient visits during the pandemic have decreased U.S. primary care physicians’ revenues, a Harvard study reports in the June 25th issue of Health Affairs.

Researchers report that, “…..as a result of decreases in office visits and fees for services from March to May during the pandemic, a full-time primary care physician will lose an average of more than $65,000 in revenue in 2020. Overall, primary care practices nationwide stand to lose nearly $15 billion.

The losses may force many practices to close, and weaken the health system dramatically. Revenue may continue to fall with a second wave of infection this year or if reimbursement rates for telehealth visits return to pre-pandemic levels. There is already a shortage of primary care providers in the United States.

Our healthcare accountants and advisors understand that half of primary care practices are small and physician-owned with limited access to capital and other support that could help them weather the pandemic storm. Thus the Fuoco Group and team at TFG Health Services has developed a presentation to assist healthcare providers in understanding and maximizing the SBA assistance out there, whether PPP loans, or EIDLs, or available pandemic tax credits. Power point presentation is attached HERE.

Reach Out To Us: Researchers said their findings show the need for a financial plan to support independent primary care doctors and small, independent practices. Although physician clinics, surgery centers, dental offices, small hospitals, and other health care businesses were among the most common recipients of loans under the Paycheck Protection Program, that alone is not enough. Talk to us about your viable options. We can help you gather the information and calculate the numbers you need to present to your bank for forgiveness. A new financial action plan or restructuring may help you and your practice weather the economic pressures on the medical field right now. Prepare to position yourself for the recovery after the pandemic with:
• Budget analysis
• Cash flow analysis
• Expense analysis
• New financial projections

Our tax experts can also help dentists and physicians take advantage of tax credits available, contact us with questions at CPA@Fuoco.com.

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PRF Grants Received By Healthcare Providers Will Be Taxed

The IRS has confirmed that Provider Relief Fund payments made available through the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) cannot be excluded from taxation under a disaster relief exemption. Therefore, the payments do constitute gross taxable income, unless otherwise carved out under an existing exclusion, such as if the provider is a 501(c) nonprofit.

The IRS clarified that for-profit healthcare providers including hospitals and independent physician practices will be subject to the 21% corporate tax rate on the grants they received from the COVID-19 Provider Relief Fund, even though the two laws that set aside $175 billion in grants to help providers cover lost revenue and Coronavirus-related expenses didn’t explicitly state that the funds would be taxable.

The IRS issued guidance stating that the grants are taxable income days before a tax filing deadline on July 15. Both hospitals and independent physician practices will be subject to the 21% corporate tax rate. The IRS guidance came in response to a question about whether a health care provider that receives a Provider Relief Fund payment may exclude it from gross income as a qualified disaster relief payment under section 139 of the Internal Revenue Code. The IRS responded “No,” and said a payment to a business does not fit the definition of a qualified disaster relief payment under section 139, even if the business is a sole proprietorship. The relief fund payment is therefore included in gross income under section 61 of the code.

Tax-exempt healthcare providers are not subject to tax on relief payments, the IRS said. However, the relief payment may be taxable under section 511 if the payment reimburses the tax-exempt provider for expenses or lost revenue attributable to an unrelated trade.

The American Medical Association is asking Congress to exempt physicians from being taxed on the payments received from the Provider Relief Fund. This provision may be included in the next COVID-19 relief package expected at the end of July.

Reach Out To Us: Given that many healthcare providers may ultimately return unused payments from the Provider Relief Fund, taxpayers should be conscious of the tax consequences of payments received in one tax-year and returned in another year. Additionally, the guidance only applies for federal tax purposes so taxpayers should also consider the state and local tax treatment of the payments.

Our tax experts can help physicians take advantage of tax credits available, and assist with budget and cash flow planning, as well as expense analysis and new financial projections. Contact us with questions at CPA@Fuoco.com.