Time-sensitive tax tips on travel and ERC tax refunds

Two time sensitive year-end tax issues for physicians: can charitable travel expenses be deducted and how to safely claim a big ERC tax credit from the I.R.S.

As we enter the final weeks of 2022 many of you are examining a variety of tax mitigation strategies both good and bad and we have previously provided detailed warnings about the seasonal abusive tax planning targeting doctors. This week we examine two issues that range from a modest tax deduction to what may be a significant financial windfall. Nothing in this forum is specific tax or legal advice. While this information comes directly from an I.R.S. publication, you should always consult your CPA or tax attorney for advice specific to your facts.

Are charitable travel expenses deductible?

Many physicians and nurses volunteer their time to charitable organizations that provide medical services and those that travel on charitable medical missions may be entitled to deduct certain out of pocket expenses.

It must be for a “qualified charity”

To deduct your costs, you must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and don’t have to apply to the IRS. Ask the group about its status before you donate your time and use the I.R.S. Select Check tool on to check an exempt organization’s status.

Deductible out-of-pocket expenses

You may be able to deduct some of your costs including travel if they were necessary while you are away from home. All costs must be:

  1. un-reimbursed,
  2. directly connected with the services, expenses you had only because of the services you gave, and
  3. not personal, living or family expenses.

Specific deductible travel expenses

The types of expenses that you may be able to deduct include:

  • air, rail and bus transportation,
  • car expenses
  • lodging costs
  • cost of meals

taxi or other transportation costs between the airport or station and your hotel.

Must have “genuine and substantial duty”

Your charity work must be real and substantial throughout the whole trip. You can’t deduct expenses if you only have nominal duties or don’t have any duties for significant parts of the trip or if a significant part of the trip involves recreation or vacation.

Value of your time or professional service don’t count

You can’t deduct the value of your time or services that you give to charity. This includes income lost while you serve as an unpaid volunteer for a qualified charity.

ERC credits - What are they and how to choose a provider

The Employee Retention Credit (ERC) program is a government benefit in the form of a tax refund. It was passed to aid and incentivize businesses with 500 employees or lessthat were either closed due to government order OR that suffered a loss of revenue of 10% of more in any division and that retained employees at the onset of the covid crisis.

ERC funds are delivered in the form of a quarterly tax credit (refund) against the employer's share of certain payroll taxes. The tax credit is 70% of the first $10,000 in wages per employee in each qualifying quarter of 2020 and 2021. That means this credit is worth up to $7,000 per quarter and up to $26,000 per year, for each W2 employee you retained. For example, a practice with ten qualifying employees at max $26,000 benefit receives $260,000.

Why are business owners excited?

  • Funds are a discretionary windfall, use any way you wish
  • Funds are not publicly reported, like PPP funds were
  • You may be eligible even if you got PPP funds, or didn’t qualify for PPP
  • Funds are not repaid or forgiven; they are yours if you qualify

What to look for In a provider?

Receiving the maximum legal ERC benefit requires a detailed tax filing that discloses what you paid and calculates the ERC funds due using your financial records. As you are personally legally responsible for the accuracy of the filing as a practice owner (or responsible practice executive) I suggest you use a professional like CPA or tax law firm rather than a document preparer. These professionals have professional liability. The best ones I found also offer benefits including:

  1. Audit defense for the filing and the refund they calculate for five years
  2. Insurance of $1MM per claim
  3. Detailed analysis of the ERC regulations to maximize your legal credit

Ike Devji, JD, has practiced law exclusively in the areas of asset protection, risk management and wealth preservation for the last 16 years. He helps protect a national client base with more than $5 billion in personal assets, including several thousand physicians