For a number of months all eyes have centered on getting by means of the altering dynamics with our income, our groups, and our operations intact. Now that we’ve navigated many of the enterprise hurdles of Q2 2020, many are swinging again to longer-term planning.
For these of us which have participated, the PPP program has necessitated a have a look at our accounting and reporting operations. For some, this has meant opening new checking accounts to assist higher handle our paper path. We’ve got additionally had many extra discussions with our CPAs to make sure we set ourselves as much as deal with our fiduciary duties correctly.
Many don’t start planning for tax season till This autumn, however there was a lot discuss shifts in tax credit and deferrals that it is best to start taking a look at now.
James Jack, Seth Carpenter, Paul Crisci, and Brad Dillon of UBS carried out a helpful podcast in April, framing the instant and long-term ways in which Covid-19 would possibly financially influence enterprise homeowners.
Though ultimate selections haven’t been made on all of the gadgets beneath, it’s important to start occupied with them now as they may influence you at Fiscal 12 months-end, and probably in years to return.
Adjustments in 2019 tax submitting and funds
Many people have been finalizing our taxes when the world went right into a distant work stance. For people who didn’t file for an extension, the federal government moved the federal tax submitting and fee deadline to July 15, 2020.
July 15 appeared like a lifetime away, however it’s important, notably as many people start specializing in re-opening our companies, to not lose observe of time. In the event you nonetheless want extra time to finish your federal taxes, you’ll be able to nonetheless file for an extension utilizing Kind 7004.
Additionally, states have totally different insurance policies and deadlines, so be certain that you comply together with your native state pointers. Nobody desires to take care of penalties at a time like this.
Potential modifications that may profit you in your 2020 taxes
To additional help with the continuity of enterprise and supply reduction for small companies, some tax coverage is beneath evaluate. It’s worth taking a look at these areas to see if you ought to be recording or monitoring issues in a different way, slightly than ready till year-end and making an attempt to backtrack.
- Delaying fee of Employer Payroll Taxes to 2021 and 2022 – Whereas the administration continues to advocate for modifications to payroll tax coverage, there are interim discussions about potential deferrals or delays in employer payroll taxes. It is very important observe that those that obtained PPP funding is not going to be eligible for this payroll tax reduction. Understandably, when you’re utilizing forgivable authorities funding to make your payroll, they might not supply a deferral. Once more, payroll taxes are very a lot in flux, however it’s essential to control this, notably when you didn’t qualify for or take part within the PPP Program, and are searching for monetary reduction.
- Adjustments to Internet Working Loss Guidelines – When companies file web working losses, they’re sometimes restricted to the interval they will use these losses in opposition to earnings. There’s a dialogue that when you paid tax on earnings lately (particular intervals to be decided), you would possibly be capable to declare losses in 2019 and 2020 in opposition to these previous earnings to obtain a refund. For instance, when you had a banner yr in 2019 and paid a sizeable tax invoice, solely to undergo a big loss this yr in 2020, you may be eligible for a refund in opposition to previous taxes. This might inject essential cash again into your enterprise. Work carefully together with your CPA to make sure you are accounting for all losses of earnings and Covid-19 associated prices to make sure you appropriately state this yr’s revenue or loss to recuperate what you’ll be able to from earlier yr’s efficiency.
- Will increase to the quantity of curiosity expense companies may deduct (doubtlessly) from 30% to 50% for 2019 and 2020 – Given the variety of working capital loans and monetary reduction packages that enterprise homeowners search presently, curiosity expense is anticipated to be an growing value of doing enterprise. Make sure that your CPA is working with the newest tables when it’s time to calculate your deductions. If in case you have already filed and paid your 2019 taxes, and the IRS enacts this modification, you may be eligible to take extra deductions on curiosity you paid in your 2019 taxes.
- Worker retention tax credit of 50% as much as $10,000 per worker on wages paid from (dates in flux) 3/12/20 by means of 1/1/21 for COVID-19 impacted companies – This specific tax credit score would require rather more definition earlier than it’s finalized. Not in contrast to the PPP and the SBA Catastrophe loan program, the definitions for an “impacted business” proceed to alter as do the dates of the influence interval. It’s worth your time to work together with your CPA to see when you qualify for this tax credit score as soon as the principles are finalized because the credit score quantity may very well be substantial. Word: There are totally different guidelines for people who make use of beneath and over 100 staff, so remember to evaluate the steerage.
- Tax credit for employers who supply paid go away to these with Covid-19 – Based on the IRS, “The paid sick leave credit and paid family leave credit are available for eligible employers who pay qualified sick leave wages and/or qualified family leave wages from April 1, 2020, through December 31, 2020, and who have fewer than 500 employees.” This program may change within the coming months by way of the quantity and performance of the tax credit. Remember to go to the IRS website for up to date steerage.
- Fee deferrals on current loan packages – Though it isn’t particularly tax-related, many loan packages are presently adjusting or deferring reimbursement schedules. Examine with the SBA—or when you’ve got fee packages in place with the IRS or conventional lenders—to see in case your reimbursement schedule might be amended to your profit.
Whereas something associated to taxes sometimes causes me to interrupt out in hives, I find it irresistible when the phrase “tax” is mixed with the phrase “relief.” In the event you’ve been working with sub-par accounting assist lately, now could be the time to make sure you have a professional advisor. Guarantee you will have the assistance it is advisable take full benefit of packages that may maintain you in enterprise whilst you pay your justifiable share.