COVID-19 And Your Business Tax Returns (Tax Year 2020)

COVID-19 And Your Business Tax Returns (Tax Year 2020)
Categorized as CARES Act, COVID-19 Relief Series Tagged , , ,

The global COVID-19 pandemic sent the entire world into an economic crisis. Some small businesses are feeling the effects of this more than others, but all US small businesses need to understand how the pandemic and resulting legislation might impact their 2021 business taxes for the 2020 tax year.

How New COVID Laws May Affect Your Business Taxes

Congress passed major stimulus packages as well as follow-up legislation to help small businesses survive. These laws will affect business taxes. Here are some things to keep an eye on for your 2021 business tax return:

  1. The Families First Coronavirus Response Act (FFCRA) requires businesses to allow for sick and medical leave, as well as tax breaks on those costs.
  2. The Paycheck Protection Program (PPP) loan forgiveness will not count as taxable income to the business.
  3. Forgivable expenses under the PPP program are deductible. 
  4. The CARES Act includes an Employee Retention Tax Credit of up to $5,000 per employee.
  5. Also under the CARES Act, you can defer the employer portion of Social Security taxes. Self-employed can defer 50% of the social security portion of their taxes.
  6. If you received a grant as part of the Economic Injury Disaster Loan (EIDL), that is not counted as taxable income. 

These are just some of the larger tax implications of the stimulus bills from 2020. Please contact your tax professional for details on your business.

What Your Business Can Do

With all of the tax implications from the COVID-19 laws, what can you do with your business to prepare for these tax effects?

  1. Claim your unused tax credits from 2018, 2019, and 2020. Congress eliminated the Minimum Tax (AMT), and the CARES Act allows you to accelerate those credits.
  2. Leverage current losses into past years returns for immediate refunds. That’s fast cash that may be available to you.
  3. Get all of your tax documentation updated, reconciled, and ready for the returns.
  4. Identify areas where your business can use these laws to minimize your taxes.
  5. Update your Estimated Tax payments going forward and assess past payments based on pandemic adjustments.
  6. Schedule time with your tax professional. Any costs to hire a pro are very likely to be offset by the savings in money, time, and headaches.

We Can Help

Surviving this pandemic economy is hard enough. You don’t need the burden of having to navigate the new tax laws to make sure your business doesn’t pay too much in taxes. We will help you understand the laws and minimize your taxes. That means more cash for you, your employees, and your family.

Call ASCEND Business Advisory at 888-297-3321 or schedule your free consultation now to get started.